Why is Life insurance considered un-Islamic

Question

I know that no one can give assurance of anything especially life, but I don't think life insurance is about that. It is a way to have something to sustain your family in case you are not there to cater for their needs. So, whats wrong with that?

Answer 1

All types of insurance are Haram (prohibited). They involve Jahalah (sale with lack of knowledge), Gharar (fraudulent transaction where details about the sold item are unknown or uncertain) - both of them are not pardoned - gambling, unjustly taking people's money, and Riba (usury/interest). There are many legal proofs that all these transactions are forbidden. Allah (Exalted be He) says:

And eat up not one another’s property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.) [Surat Al-Baqarah 2:188]

And:

Shaitân (Satan) wants only to excite enmity and hatred between you with intoxicants (alcoholic drinks) and gambling, and hinder you from the remembrance of Allâh and from As-Salât (the prayer). So, will you not then abstain? [Surat Al-Mai'dah 5:91]

Moreover, the Prophet (peace be upon him) forbade Gharar sale [Muslim, Book on transactions, No. 1513].

Source: Insurance

Al-Gharar is something that involves uncertainty, risk or speculation.

Narrated by Abu Hurayrah (may Allaah be pleased with him):

“The Messenger of Allaah (peace and blessings of Allaah be upon him) forbade transactions determined by throwing a stone and transactions which involved some uncertainty.” (Narrated by Muslim).

Also,

Shaykh ‘Abd-Allaah ibn Jibreen was asked what if the commercial insurance is compulsory and cannot be avoided.

He said:

If insurance is compulsory and cannot be avoided, the one who is forced to buy it is excused. But if it is not compulsory then it is not permissible to buy it, so long as it is a type of commercial insurance, because it is a kind of gambling which is forbidden.

Note: This is only for commercial insurance

More: Elaborate rulings on Insurance

Answer 2

The short answer to your question is that in Islam you can't trade or make commercial transactions about that which you do not own. Our life is in God's Hands - we do not own our lives, we merely "look after" it. Also as Dr. Hatem quotes in the article linked below from Faisal Maulawi, life insurance is all about accumulating wealth - there is no element of removing harm or risk or anything.

As for other forms of insurance, @Ershad's answer gives you the answer from Eastern scholars who may not necessarily be familiar with insurance as practised in Western lands or scholars who issued their rulings for Muslims living in those lands. Insurance can be a highly complicated matter that requires a good amount of scholarly research to fully understand. For a Western perspective or Muslims living as minority perspective, I highly recommend Dr. Hatem al-Haj's treatise on the subject. Dr. al-Haj is a member of AMJA, the Assembly of Muslim Jurists of America. He concludes by essentially saying that in a vacuum, it would appear after analysis that insurance as practised today commercially is not permissible. Even in context, a lot of it doesn't rise to the level of darurah, except perhaps for certain cases (read the full article for details). In the case of life insurance, there is just no need-based justification for overturning the general impermissibility of insurance. Numerous ayaat and ahadith make it clear that Allah is the Provider, and there is no need to resort to unlawful means for fear of "possible future poverty."