Why don’t Muslims subscribe to life insurance?

There are two elements found in insurance that result in it becoming Haraam. These are gambling and interest. Let us assume that a person subscribes to an insurance policy that covers him for theft, fire, accident, etc. He contributes R500.00 per month over a period of 5 years which is a total of R30 000.00. However, he never experiences any tragedy whatsoever within the 5 year period, hence losing all his contributions. This is considered as gambling in Shariah as there is a possibility of winning or losing.

On the other hand, let us assume that he gets involved in an accident (Allah fobid!) and the insurance company pays out R60 000.00. In this instance, the R30 000.00 extra is considered as interest (Riba) which is Haraam. In conclusion, because of these two elements insurance is Haraam.

In a life insurance, a person may have contributed R200 000.00 for example until his demise, yet on his demise, his family is paid out R2 million. The R1.8 million over and above his contribution in premiums is considered as interest, the impermissibility of which is proven directly from the Quraan Sharif, hence impermissible. We hope this explanation will assist in understanding the impermissibility behind insurance.