What are the objections against conventional life insurance
What are the objections against conventional life insurance?
There are various reasons cited by those who do not accept life insurance from Islamic point of view, can be generally divided into three main arguments:
i) Gharar (Uncertainty);
ii) Maisir (Gambling); and
iii) Riba (Usury).
This is defined as a contract in which the results e.g. the compensation or benefit to be paid, depend on the outcome of future events that arc not yet known at the time of Signing the contract. This is prohibited under Sharjah law. Unknown, uncertain or unclear factors, however do exist in the operation of an insurance contract There are such factors present in One form or another, in every type of conventional life policy.
The clement of gambling arises as a consequence of Gharar. Examples include when a Policy holder takes out a pure endowment policy. In so doing, he is taking a gamble that he/she will still e alive by the end of the term of the policy to receive the benefits stated in the contract. Some scholars, further, argue that the source of money that is to be used to pay for the benefits or compensation may come from non Halal sources as they are not determined
What constitutes riba is rather hard to define, as there has always been disagreement among scholars However, it is generally agreed that the basic
definition of riba refers to “interest” or ‘Usury’ the price paid in addition to
the principal amount for the use of borrowed money or capital over a period
of lime. In addition to being tied to the amount of the loan and the time
frame, its payment must also be guaranteed regardless of the outcome of
the venture in which the capital is invested. As the underlying investment
activities of many insurance company contracts are interest based,
Conventional life insurance policies, therefore, contravene the Sharjah.