The Inheritance of Life Insurance Proceeds

A female scholar from Jami‘at al-Falah, Baliriya Ganj, Azamgarh has asked the following question:
“Assalāmu ‘alaykum wa rahmatullāhi wa barakātuh. If a Muslim in India takes out life insurance, which contains elements of both gambling and interest, is it permissible for the heirs to use that money after his death?”

Answer:
According to some jurists, insurance is permissible. Naturally, in their view, any proceeds from it would also be lawful for inheritance just like any other permissible wealth or property.

In my opinion, only those forms of insurance are permissible which fulfil a genuine need—such as property insurance in areas prone to riots, or health insurance in certain countries. Life insurance, however, does not fulfil any essential need, and therefore, its prohibition remains as it is.

After the death of a person who had taken out life insurance, only that portion of the payout which he paid in instalments (premiums) should be distributed among his heirs, as that is his actual wealth.

Any amount beyond what he paid in premiums should only be given to those heirs who are poor, i.e., who do not own the nisāb (threshold amount) for zakāt. In distributing this excess, the usual inheritance shares should not be followed; rather, it should be distributed based on their poverty. If none of the heirs are poor, then that excess amount should be given to other poor people. It must not be used for mosques, madrasas, or similar causes under any circumstances.

Disclaimer: This article was translated by AI. Original post available at: https://t.me/DrAkramNadwi/6035