Using insurance in estate and financial planning : using life insurance in estate planning

السؤال

Dear Dr. Kahf : ASAK, I hope this email finds you well. You were kind enough to answer some questions for me regarding Islamic will provisions last year (I am a financial planner with a number of clients with these concerns). I have other few questions that I'd very much appreciate your opinion on if you have a moment. 1. First, do you have an opinion on life insurance ? Clearly, there are elements of Riba in that one cannot control what the company is holding. But it is second or third degree Riba at most (you are not directly receiving interest). And naturally, it is somewhat of a necessity (or at least, a perceived necessity) for most families. Are there some types of life insurance you consider to be more acceptable than others ? 2. Second, IF you are okay with life insurance, how would you feel about this : Consider the scenario where a couple have an Islamic will, and their only asset (for simplicity) is a house worth $ 2M, jointly owned. The husband dies. Half the house already belongs to the wife. But the other half must be passed down according to the will. How would you feel if, in anticipation of this scenario, the husband gifts money to the wife during his life so that she may buy a life insurance policy for $ 500,000 on his life ? This way, when the husband dies, the wife has money to buy out the relatives and retain the entire house. Do you feel this is intelligent planning, or abuse of the rules ? I have always believed that a participating whole life policy from a mutual life insurer is a practical acceptable format as well. The reasons include : • The mutuality of the contract means that there are no outside parties benefiting-the company works as a cooperative. This is similar to the concept of Takaful. Cooperation alone is not sufficient there is also the condition that the premium is given as donation. Besides even in mutual the contract is between two parties. In Takaful it is not. • Moreover, there is no "interest" earning in the policy, as the buildup is based on the profitability of the enterprise itself. There is no guarantee. The whole life as I know it has interest earned as explained above. • Yes, the underlying investments are largely in bonds, but based on your point that the internals do not matter, this is okay. If you can find time to comment on this, it would be of help. If this concept of whole life insurance is not familiar to you, please ask me to explain more, which I will gladly do. The variable life insurance option you propose makes sense, but is impractical since veritably no insurer offers investments that are Halal. In short, by the logic you mention, whole life works. But if you disagree with this, I need to understand your reasoning. Thank you. Your thoughts would be appreciated. Jamal Wasalaam,

جواب الفتوى

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تاريخ النشر

2011-03-29

التخصصات الرئيسية

الاقتصاد و التجارة
الدراسات الإسلامية

الموضوعات

• الفقه الإسلامي
• التأمين على الحياة
• التخطيط العقاري

عدد الصفحات

3

نوع البيانات

فتاوى

لغة النص

الإنجليزية

رقم السجل

BIM-729549

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