Life Insurance Haram – Whether life insurance is halal or haram is an important issue in Islam, unfortunately, there is a lot of misinformation published in this field. In this article, I will explain the types of life insurance and tell you my opinion about both the agility and the financial sense of getting life insurance.
The two main categories of life insurance are: term life insurance, which is for a certain period of time, and permanent life insurance, which pays continuously during the life of the policy owner (there are several) and includes money.
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There are various products that fall under the category of permanent life insurance, such as whole life insurance. You will regret buying this type of insurance for the rest of your life.
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With permanent life insurance, a portion of your monthly payment goes toward building cash, while the rest covers premiums.
Because of this additional cash component, permanent life insurance is typically 10 times more expensive than term life insurance for the same amount of coverage. (1)
My advice is to avoid any type of permanent life insurance, such as avoiding looking at the sun during a solar eclipse, for several reasons:
Second, if you find a permanent life insurance policy, even if the cash component does not earn any interest, you should avoid permanent life insurance policies because when you die, after paying ten times more than you need, you will have to pay out of the life insurance policies. Avoid permanent. To build cash value into your policy, your beneficiaries will not receive any of that cash value. They only receive the death benefit, but not the cash value of the policy.
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If you want to cash out your policy during your lifetime, you’ll have to cancel your policy, then you’ll be charged an arm and a leg, and you’ll only get a fraction of the cash value back. Otherwise, get it, the insurance company will give you a loan against the cash portion of your policy and you will pay the insurance company interest on this loan that you never had to take out in the first place!
I urge you to avoid getting permanent life insurance the way you avoid being stuck in the neck with a rusty needle because you get permanent life insurance.
Keep in mind that insurance agents often have an incentive to sell you permanent life insurance because they charge a higher fee for selling you permanent life insurance than they do for term life insurance.
So, if you ever find yourself in a situation where an insurance agent is trying to sell you permanent life insurance, I want you to pray for them first and take action to get them out of your face.
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The term life insurance means that in exchange for monthly payments, the insurance company undertakes to pay a predetermined amount called “death benefit” to the insured beneficiaries in the event of the death of the insured.
Consider the following: Suppose you are a 30-year-old male with little or no savings and the sole breadwinner in your family. You have a wife and 2 children. In the event of your sudden death, you estimate that $500,000 would be needed to maintain your family’s current standard of living until your spouse finds a suitable job and/or your children are old enough to work and take care of themselves. . So, take out a term life insurance policy for the next 20 years that pays your family $500,000 if you die during that time.
To keep your life insurance policy active for the next 20 years, you typically pay the insurance company a monthly payment called a “premium.”
The key to whether life insurance is halal or not is to understand what type of life insurance contract it is. Is it for sale? Debt? Cash in cash exchange? Is it an investment? What is this really?
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To answer this question, you should ask: What is the motivation of the insured to pay monthly to the insurance company?
What does the insured gain from paying the monthly insurance premium? Is it true that they only get something when they die?
All things being equal, whose family is more financially secure, the family of the person with life insurance or the family of the person without life insurance?
An honest assessment of financial security for both families clearly favors the insured family.
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So let’s go back to our question, what is the insured’s motivation to pay monthly to the insurance company? It is clear that the motivation is to obtain more financial security for their beneficiaries.
Again, the availability of this cover does not depend on the death or non-death of the insured. This coverage is insured for life.
Therefore, when the insured makes the monthly payments, the insurance company receives the payment and in return buys a legal obligation from the insurance company that if the insured dies within a certain period, their beneficiaries will receive a predetermined amount.
So life insurance is a sale. An insurance company sells a legal promise to the insured.
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Objectively, it can be said that insured beneficiaries are in a more secure financial position than uninsured beneficiaries, all things being equal.
What makes many people not recognize insurance as a sale is that the insurance company’s promise to pay is not a certainty. Some commentators can only see this as cash flow. That is, they can only see that one side gets paid, the insurance company, and the other side, the insured, who sometimes gets paid in return, but usually nothing.
This could not be further from the truth as it clearly favors the insured when comparing the financial security of insured versus uninsured beneficiaries.
Verily, God [only] knows the Day of Judgment, sends rain and knows what is in the womb. No soul knows what tomorrow will achieve, no soul knows in which land it will die. Indeed, God is All-Knowing. Quran, Surah Luqman, verse 34
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Since the risk of losing a family’s primary breadwinner through unexpected death is real, isn’t it wise to protect against this particular risk? Of course it is.
Most fair-minded people would agree that protecting your family from the very real financial risks they face if they lose their main source of stability is a responsibility you have to take.
No, as long as you are insured, your beneficiaries are protected from severe financial hardship in the event of your death.
If I buy a car seat for my child that won’t be used because it hasn’t been in an accident, should I regret my purchase? Should I not have protected my child? If you’re like most people, the answer isn’t obvious.
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Do I have the right to get my money back from the car seat seller? No, I paid for a product and this is what I got. If I think correctly, I should be thankful that I don’t need a car seat.
Similarly, when you pay for life insurance, you pay for a legal obligation. Whether you need it or not, you have this legal obligation. If you think about it, you should be thankful that you don’t need the life insurance you bought.
If someone dies during the [life insurance] period, he will be successful, even if he dies now.
I have to admit I laughed. I doubt most people would agree with the author.
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Now that we have determined what insurance is, let’s see if life insurance has three main corruptors of business contracts in Islam:
For usury to exist, there must be some form of loan, overt or hidden (sometimes loans are disguised as money-to-money transfers).
When the insured pays the premium, it does not make a loan to the insurance company (if it fails to repay its premium, the insurance company is in default) or the insurance company does not pay the death benefit to the insured’s beneficiaries. They are paid. So there is no debt of any kind here.
Is it a loan disguised as a money-to-money transfer? In a money-for-money exchange, if either party does not receive payment at some point, the other party is almost certainly in default.
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