Life Insurance - is it Haram?

At the moment i'm reading a book by our Mufti Kerajaan specifically on the life insurance area. From my reading so far I can conclude that it's haram. But let me just finish it first.

You can check out at Mufti's homepage at the link below:

http://www.brunet.bn/gov/mufti/terbitan/t_isu.htm

Ok done! Here i will post you the exact content from the book wrt to life insurance from Mufti's perspective. I leave it to you to judge.

Reference: Monetary Issue 

Year of published: 2000

Published by: State Mufti's Office

ISBN: 99917-33-22-1

Starting page: 493

Series 17/1973

Question 1: The Hukm on Life Insurance

What is the hukm (tuling) in Islam with regards to life insurance?

According to those well-informed on matters of life insurance"

The insurance company repays to the insurance policy holder all payments he has made to the company plus an amount exceeding these payments.

(This happens) when the insurance policy holder lives to pay all payments due from the beginning to the end (until the policy matures).

Undoubtedly, the payment made by the company to the insurance policy holder, apart from being repayment of the payments made from the beginning to the end, is riba (usury) or interest.

The insurance company has used part of the money paid by the insurance policy holders to give loans to others by charging interests and making profits. Insurance policy holders are therefore helping insurance companies to carry our riba.

Due to the above two reasons, insurance is not accepted in Islam. Wallah hu'alam.

Series 40/1975

Question 2: Involvement In Life Insurance

What is the hukm (ruling), from the point of view of shara', on any kind of insurance, including a Muslim who is involved in life insurance matters. 

The insurance available today is a western method of transaction, implicit within it are gambling and usury. Therefore, those who are involved in insurance groups are either partaking in riba or receiving wealth from gambling.

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If the insurance policy holder lives to an age agreed upon between him and the insurance company (until the policy matures), and he has paid all premiums that were due, the insurance company will then repay all premiums paid by him, plus a certain amount based on a certain rate, together with the premiums. This must surely be riba and interest. Should the insurance policy holder die before the agreed date, (before the policy matures), the compaby will pay to the heirs an amount similar to that agreed upon even though he has not paid any premium yet. According to hukm, this is gambling.

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Furthermore, the company invests the premiums, or part of it, in riba practices such as issuing loans with interest or riba. The person paying the premiums is therefore helping the company to carry out riba or charge interests and riba. Interests are transgressions and are great sins, and Allah has threatened war against the perpetrators of riba. 

According to the Hanafi school, entering into a contract involving riba or gambling, and similar activities, is prohibited in Islam and is clearly haram (unlawful) but if it is in a kafir (non-believers') country, and the payments are also received in the kafir state, then it is permissable and possible, should there be a willingness amongst the Muslims (those allowed to enter the kafir state) and the kafir, but it is haram and it is not permissable to enter into a fasid (immoral) contract, a gambling and riba contract, and other similar contracts, among Muslis and the kafir, and to receive the payments whilst both are residing in a Muslim state. This is because a Muslim country is where Islamic hukm is practised. That is what we understand from what was said by Sheikh Fuqaha' Mesti Al-'Allamah Ash-Sheikh Muhammad Bakhit, Mufti of Egypt, who dies in the year 1345 Hijrah Rahimahullah Ta'ala.

To buy a life insurance policy on a whim and fancy while expecting profits and benefits from it is wrong and batil (invalid) and a sin because life insurance and assuring the life of a person cannot be done by a company or a doctor or an economist. Only Allah Ta'ala knows the life span of a person and no other being has knowledge of it. Everybody knows this.

The company is actually trying to get business and profits by means of gambling, guessing and speculating and therefore their effort is batil and wrong from the point of view of Islam. It is the devouring of the wealth of others through riba (usury) and gambling.

Life insurance is a contract which is fasid (void), it cannot be included in dhaman (guaranty) or kafalah (bail) contracts and to practise a contract which is fasid is a great sin, as stated by Al-Imam Ibnu Hajar and other iama; while halal wealth is blessed.

So what do you think? I have withdrawn all my life insurance and investment policy from this life insurance company in Brunei (don't want to mention the name of the company).

But the funny thing is, i have heard from some people, even the insurance company agent himself told me that Life Insurance company such as AIA, was actually approved by the State Mufti Office and they do regular visits on these companies now and then to see their way of transactions. Wallahu 'alam. Not sure to believe it or not. 

Another thing he mentioned that Brunei Life Insurance company such as AIA is not Takaful certified, not like AIA in Indonesia and Malaysia.

Here's a link wrt to AIA Malaysia get international takaful operator licence:

http://islamicfinanceupdates.wordpress.com/2008/09/23/aia-first-to-get-international-takaful-operator-licence-in-malaysia/

This is all so confusing for me. Takaful operator licence????

I mean aren't all life insurance all are Haram?? as mentioned in the Mufit's book??

What about the Islamic bank such life insurance?? like in TAIB or BIBD? i heard it's compliant with the syariah (islamic ruling)

Anyway i have given you all the best insight of our life insurance in Brunei. Whether we're gaining or loosing for not joining it, i'll leave it to you to judge. I have raised every known issue that i can think of on the table. Insya Allah will pray Solat Istikharah to let Allah decide and bring guidance to our daily life transactions. (Who knows best).

Jazakallah