Life insurance : life and disability insurance : [1]

Fatawa Question

ASAK. It is my understanding that separate accounts established under a variable insurance policy having non-interest bearing funds such as all stock mutual funds are permissible under the Shari’ah principle. Obviously, companies (originally) issuing the stocks need to be qualified, such as, no tobacco, pornography, gambling etc., and the capital structure cannot be leveraged more than 33 percent and so on. On the other hand, the policy holder does not have any control on the underlying assets on term life which may be invested in balanced funds (bonds and stocks) or otherwise. The question becomes how can we assure investments based on Shari’ah Principle under term-life policies when we don't have control over the investments ? Typically insurance companies put $ 3 of $ 5 dollars in reserves for liquidity and they are retained in interest bearing accounts and corporate bonds for term-life insurances. One other question I have for you is though insurances are aleatory (unequal) contract. The cost of few are borne by the majority (the law of large numbers). Is it permissible in Islam ? Isn't lottery Haram ? If it is, can you please provide us with a reference from the holy book, Hadith or any other authoritative sources based on your research ? This will enhance our understanding and I can quote such sources to my clients like brother Dr. Najeed. Best regards,

Fatwa

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Publication Date

2007-12-27

Main Subjects

Economics & Business Administration
Islamic Studies

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-784982

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