What is the legal status of life insurance in Islam?

Answer 1

General Discussion of Insurance
Typically, Islam is opposed to the provision of any insurance, including life insurance, considering it to be violations of the major Islamic finance prohibitions: gharar (غرر) and maysir (ميسر) as well as riba (رباء) in many cases. There is takaafol (تكافل), which is often claimed to be Islamic-Law-Compliant Insurance, but is not really anything like insurance. Takaafol is better understood as a community welfare pot, where all of the relevant families pay in at a certain fixed rate and payments are made out of the pot as needed by the people who paid in. Insurance operates based on syndicates that maintain their own moneys and provide policies to prospective individuals or businesses who wish to secure an asset using the syndicate's wealth.

Gharar, Maysir, and Riba
Gharar is the concept that the risk of investment not turning a profit by one or both parties may be too high or speculative. In the case of life insurance, there is the possibility that the customer consistently pays into the policy but does not receive the benefits (because he dies in a method not covered by the policy). Conversely, it may be that he dies right after signing the policy, in which the case, the insurance company has not received anywhere near the amount of money that it needs to pay out. This high level of speculation is not permitted. One of the easiest ways to point out the presence of gharar is if the contract could operate in such a way where one party derived a negative result and the other a positive result by its commission.

Maysir is a similar concept to gharar, but specifically refers to the gambling or actuarial aspect of a deal. For a deal to be gharar, it need only be very risky or speculative, such as an advance contract for selling fish that you will have to catch (the fish may not be there and you will be in debt as a result). Maysir is the "lottery idea" that insurance is based on, namely that the insurer will have to pay out on some policies more than what was paid in and that on many policies, the insurer will receive more than must be paid out. This imbalance is unacceptable from an Islamic perspective.

Riba is the concept of interest or usury. Most insurance does not run directly afoul of riba prohibitions, but conventional insurance companies use interest-bearing accounts, bonds, and loans in order to cover their monetary needs. As a result, life insurance will usually violate riba in this way.

Answer 2

most scholars give fitwa that life insurance is permitted in islam and this is an contract between a company and a person under its terms.

Answer 3

It is illegal under sunni Islamic law (Hanafi).

Answer 4

Most of the Muslim scholars consider insurance Haram (unlawful) in Islam. It has nothing to do with Islam.