Life Insurance is Haram

Why conventional Life Insurance is Haram

Objections raised on Conventional Life Insurance

Apart from the commonly held view among Muslims that life insurance is not permissible in Islam on the grounds that it reflects disbelief that God has decreed the moment of one’s death, or distrust in God’s providence, some Islamic scholars and many Muslims take a strong view that life insurance is totally prohibited in Islam because of the way life insurance is operated in the conventional system. Conventional insurance contains elements that are not in conformity with the principles of Shari’ah:

Riba: Interest

·         A life insurance policy under the conventional system contains elements of riba where premium income is invested in interest-bearing assets and securities.

·         An element of interest also exists in conventional life insurance products – as the insured, on his death, is entitled to get much more than he has paid

·         Insurance funds invested in financial instruments such as bonds and stocks contain an element of riba. Takaful contributions paid by participants/policyholders under a Takaful scheme are operated on the basis of mudarabah (profit-and-loss sharing) free from elements of riba.

Quran - Allah is All Merciful

Dua - Guidance and Piety

Maysir: Gambling

·         The insured contributes a small amount of premium in the expectation of gaining a large sum

·         The insured loses the money paid for the premium when the insured event does not occur

·         The insurance company will be in deficit if claims are higher than the premiums paid when a life insurance policyholder dies after only paying part of the premium his dependents receive a certain some of money which the policyholder has not been informed of and has no knowledge as to how and from where it has been derived.

·         The idea of a conventionally designed life insurance policy is that if the assured dies at any time before the maturity of the policy, the nominee(s) is entitled to recover from the insurer the whole amount agreed in the policy. While if the assured is alive at the expiry of a permanent life policy period, the insured is also entitled to the whole amount agreed in the policy, plus the interest, dividends and bonus, subject to the company’s policy. On the contrary, the paradigm of a Takaful model of life insurance is that if the assured dies at any time before the policy matures, the beneficiary(s) is entitled to recover from the insurance company the whole amount of paid premiums, the bonus and dividends according to the company’s policy and a share of the profits made on the paid premiums, plus a donation from the company’s charitable fund according to the financial status of the beneficiary(s) (i.e. if the beneficiary(s) is financially in good condition the amount will be less, but if the beneficiary(s) is financially weak and unstable the amount could be greater). Such a transaction is considered as co-operation towards the welfare of the helpless people in society, and it is thus in line with the ruling in The Qur’an. “…Help ye one another in righteousness and piety...” [5:2]

·         However in the case that the assured is still alive upon the expiry of the policy period, the assured is entitled to recover from the company the whole amount of the paid premiums, a share of the profit made on the paid premiums according to the principle of mudarabah bonus and dividends according to the Takaful company’s policy.

Gharar: “Uncertainty”

·         The insurance contract contains excess uncertainty whereby a person pays a cash amount for payment of a claim against the occurrence of a future event when it is not known whether the event will actually take place and the time it will occur is also not known. Any form of contract which is characterized by the domination of one party at the expense and unjust loss to the other is classified as Gharar. When a claim is not made the insurance company may acquire all the profits whilst the participant may not obtain any profit whatsoever. The loss of premiums on cancellation of a life insurance policy by the policyholder, or the "double standard" condition of charging a customary short period in general insurance, whilst only a proportional refund is made if the insurance company terminates the cover is also considered as unjust.

·         In the operation of a life insurance policy under the conventional system, the payments for the agents are to be paid out of the insured’s paid premiums.

·         Whereas under the Islamic model of a life insurance policy the agents work for the company and thus they should be paid by the company itself. This means, the payment for the agents could include a share of the profits made on the paid premiums, plus dividends and bonus according to the company’s policy.

Insurable interest

·         Everyone has unlimited insurable interest in their own life and, theoretically is entitled to effect a policy for any sum assured. In practice, the cost of the policy often limits a person’s ability to insure his or her own life; a person who is married also has interest in the life of his or her own spouse. Certain people can insure the life of others with whom they bear a relationship, recognized in law, to the extent of a possible loss. Accordingly, in a business partnership the partners can insure each other’s lives, as they stand to lose on the death of one of them. In the same way a creditor stands to lose money if an unsecured debtor dies before repaying the loan, and therefore has insurable interest to the extent of the unsecured loan plus interest.

·         In a conventional system of life insurance, the nominee(s) is an absolute beneficiary(s). Suffian J., in Re Man bin Mihat by virtue of Section 23(1) of The Malaysian Civil Law Act 1956, decided that the nominee inter alia in a life insurance policy is an absolute beneficiary who takes absolutely and exclusively the benefits of the policy. In contrast, the nominee(s) in a life policy under the Takaful model is not an absolute beneficiary(s) but a mere trustee, who is in a position to receive the benefits of the policy on behalf of the insured’s heirs and distribute it among them according to the principles of mirath (inheritance) and wasiyah (bequest). In Karim V. Hanifa, The High Court of Karachi ruled that the nominee(s) in a life insurance policy is nothing more than an agent. The National Council of Muslim Religious Affairs in Malaysia, also issued a Fatwa to the same effect in 1979, that the nominee(s) in a life insurance is a mere trustee who is supposed to receive the benefit of the policy and distribute it among the heirs of the assured, according to the principles of mirath and wasiyah.

·         In other words, the insurable interest, under the conventional system it is vested in the policyholder solely, should he/she be alive upon the expiry of the policy period. However, in the event of the death of the insured within the policy period, the insurable interest will be paid to the husband or wife, parents or children, benefactor or other nominated beneficiary or trustee, company and director, partners, mortgagor and mortgagee, according to the policy. In contrast, under the Islamic model, insurable interest is vested in the assured or in the insured’s heirs, according to the principles of mirath and wasiayah.

Rational Outlook

·         Having a life insurance policy does not mean just insuring one’s life but is a fair financial transaction for the benefit of certain helpless people in society. The rationale behind having life insurance may be considered as follows:

·         It is one of the means used to provide a material safeguard for the offspring of the deceased and thus in line with the saying of Prophet Muhammad: “It is better for you to leave your off-spring wealthy than to leave them poor, asking others for help” (narrated by Sayid bin Abi- Waqqas, Companion of Prophet Muhammad)

·         It provides future material security for widows and other dependents of the deceased (assured). Prophet Muhammad in fact encouraged the provision of security for widows and poor persons, as recorded in one of his Traditions: “One who looks after and works for a widow and for a poor person (dependent), is like a warrior fighting for the cause of Allah, or like a person who fasts during the day and prays throughout the night’ (narrated by Safawan bin Salia, Companion of Prophet Muhammad)

·         It ensures that certain persons (widows, orphans, etc) will have protection from unexpected future material difficulties, which otherwise may result in hardship for those people. Prophet Muhammad advised the people to protect one another from any form of hardship and difficulties when he said to them: “Whoever removes worldly grief from a believer, Allah (SWT) will remove from him one of the grief’s of the Day of Judgment. Whoever alleviates the problems of a needy person Allah will alleviate his problems in this world and the next “ (narrated by Abu Huraira, Companion of Prophet Muhammad)

·         It ensures co-operation and solidarity among participants. It is also a positive initiative by the assured towards a positive material status for widows, offspring, etc. Hence, such co-operation towards a positive goal is, in fact, ruled in The Qur’an.

·         “Help ye one another in righteousness and piety’’ [5:2]

·         It is like taking an initiative towards ensuring a self-reliant society and alleviating hardships. It is in line with the Qur’an ruling. “Allah intends easy life for all of you, while He does not want you to be in difficulties...” [2:185]

Khalid Bin Waleed “Saifullah” The Battle of Moatah

The Great Commander and Ultimate Warrior 

Khalid Bin Waleed “Saifullah”

A strong and sturdy physique, tall stature, broad shoulders, dignified bearing and eagle-eyed with a brilliant intellect, noble thoughts and firm determination this was the grand personality of Khalid bin Waleed, one of the greatest warriors and commanders of Islamic army. He was the ideal man uniting personality both physical and intellectual beauty. He was the personification of nobility and majesty, and an enviable example of all the best qualities. An unparalleled rider, an expert swordsman and equally adept with the spear or any other weapon, he was noted for his courage and his foresight in planning.

He is recognized in the world's military history as one of the greatest generals of all time. Triumphs and victories used to kiss his feet and even his worst enemies acknowledged his military expertise.

That the greatness and majesty of Caesar was laid low in the dust by him is doubtless a miracle caused by the ingenuity and well planned tactics used by him in leading his men. The eyes of the world saw that the mighty resources of Rome and Persia were never deterrents for him. From the beginning to the end in every conflict between Good and Evil, he remained victorious and with the help of Allah Almighty's blessings he never faced defeat. The boundaries of Syria is a city called Moatah. The confrontation, which took place here, is called the War of Moatah. This is the first war in which Khalid bin Waleed took part as an ordinary soldier after his conversion to Islam. But after three generals were martyred, one after another, the mantle of leadership fell on him. There were only three thousand Mujahedeen and they were totally spent and exhausted. The enemy, on the other hand, numbered one hundred thousand fierce warriors, who were very well equipped and armed.

The war started due to the following incident The Prophet sent one of his most faithful Companions, Haris bin 'Amr Azdi , with a letter for the ruler of Basra, Haris bin Ami Shamar Ghassani. He had barely reached Moatah, a town in the province of Balqa, on the borders of Syria, when the Governor of the province, Sharjeel bin ‘Amr Ghssani, came to hear of his arrival. He immediately had him arrested and killed brutally. When this terrible news reached the Prophet, he was very grieved and upset. Another incident took place around the same time. A missionary group of fifteen of the Prophet's Companions was in Syria engrossed in carrying the Message of Islam and enjoining its teachings. All these Companions were in a place called 'Zat AlAtlah', when they were treacherously murdered. Then again, around the same time the ruler of Rome had threatened to invade Al Madinah. These were the main reasons why the Prophet $3 sent an army under General Zaid bin Harithah. He had instructed that in case Zaid bin Harithah, was martyred during the war, his place should be taken by Ja'far bin Abi Talib If he too was martyred hen 'Abdullah bin Rawah a should take over the command the forces. If he too should be martyred then the Mujahedeen should decide on who should be their Commander. He had a white flag made for the army and entrusted it to General Zaid bin Harithah . He commanded the army to camp at the spot where Haris bin 'Amr Azdi , had been martyred, ask Allah Almighty for help and stand firm to battle against the enemy. He further instructed them not to break their word and not to perpetrate any breach of trust. They were ordered not to kill old people, women or children. Nor should they kill any recluse or monk who had abandoned the world to pray or meditate. No buildings were to be razed to the ground, nor trees to be felled or destroyed. After receiving their orders from their Commander in Chief, the Prophet, the army set out on their extremely difficult mission. After crossing very difficult territory they finally reached the Syrian border and entered the province of Balqa’. Here they got the news that the Roman emperor Harqul had sent a huge army to fight these and full of Muslim soldiers, and they were already encamped in the field. So the Mujahedeen turned direction and marched towards Moatah. At this place the two armies confronted each other and heavy fighting broke out. The Muslims fought fearlessly and 2aidi bin Harithah the general, realizing his responsibilities as the Commander attacked the enemy. In order to boost the morale of lus handful of men, he fought with the vigor and zest of four men. There was destruction, perdition and panic all round, as he advanced plunging through the ranks of the enemy, and finally achieved martyrdom. Now Ja'far bin Abu Talib took command and holding the flag in his hand led the Muslim army. He too rode fearlessly, trying to break through the ranks of the enemy.

Since the enemy's army was huge and the fighting was intense, it was difficult to ride through them, so he jumped off his steed and rushing through their ranks started to rip off the heads of the enemy with his sword. Finally, one of the enemy soldiers managed to land a powerful blow and cut off his right hand. He took the flag in his left hand and the enemy cut off the left hand as well. He still did not allow the flag to fall down and continued to hold it with the help of his legs and what was left of his arms. The enemy struck a final and fatal blow, and Ja’far; attained the exalted status of a martyr. According to the instructions of the Prophet, 'Abdullah bin Rawahanow took over the responsibility of General. Moving forward he took the flag, and finally he too after displaying marvelous deeds of heroism reached martyrdom, and the Glorious Presence of Allah Almighty.

The morale of the Mujahedeen was now at its lowest; they had lost three Generals, and even their flag had fallen to the ground. Considering the disproportionate numbers of the huge Roman army and the small Muslim force, defeat seemed certain. The white flag of the Muslim army had almost fallen into the hands of the enemy, when Thabit bin Aqram with a dexterous move took up the flag. He then turned to Khalid bin Waleed and addressed him thus:

"Please take this flag into your hands; at this most difficult of times only you can perform the duty of a leader best."

Khalid bin Waleed in very civil and humble tones declined the honour, saying Thabit was superior to him; having taken part in the battle of Badar he had the right to be the leader of the Mujahedeen, he said. But Thabit bin Aqram   was adamant and swearing by Allah

Almighty he said it was a proved fact that with his deeds of valor, Khalid bin Waleed had shown his mettle. He said he had picked up the flag from the ground only to hand it over to you. He again requested him to hold it up and tackle the critical situation with his wise and strategic planning. The Mujahedeen needed his military skill, daring and brave leadership. He said the army needed him at this crucial juncture to perform the important duties of leadership and non plus and confound the enemy so that the Muslim forces could get some breathing space. Then turning to the Mujahedeen asked them if they were would like to accept Kh2lid bin Waleed, as their leader.

They all, answered that they would be happy to have as their Commander him. Realizing that he was the choice of the Mujahedeen

Khalid bin Waleed picked up the flag, accepting the position of General. And he fought so fiercely and firmly that nine swords were broken in his hands and the enemy was thwarted. Compared to the enemy the Mujahedeen were very few in number. Bringing experience and masterly strategy into play, Khalid bin Waleed changed the whole formation of the army. He picked out a group of the Mujahedeen to remain at the back in hiding, and then suddenly appear and join the rest of the army. As a result the whole atmosphere was filled with dust and sand as they moved forward.

The Roman army panicked when they saw this and thought that reinforcements had arrived. Their morale started to live down and taking advantage of this opportunity. Khalid bin Waleed started to move out the Mujahedeen very carefully out of the circle of the surrounding enemy, and into a safe area. Earlier the Romans had been very confident that they would decimate the Muslims, and not even one of them would be allowed to leave the battlefield alive. Their confidence was very high because in the recent past they had defeated the Persians; they were intoxicated by their victory and thought a handful of the Mujahedeen would be no match for them. Khalid bin Waleed with his God given skill in planning had put into practice intelligent tactics to defeat the enemy. With the every first day they were shattered when they saw him break nine swords. And when he saw 011 the second day that the Romans were frightened, panicking and ready to retreat he took advantage of the opportunity to take his men back to safety. To bring back the army intact under such precious and critical circumstances was no mean feat and unforgettable in the annals of military history.

Remaining Calm When Dealing with People’s Mistakes

Being too harsh could make matters worse and do more harm than good. We can learn this from looking at how the Prophet (SAW) dealt with the mistake made by the bedouin who  urinated in the mosque, as was reported by Anas ibn Malik (RA), who said:

“Whilst we were in the mosque with the Messenger of Allah, a bedouin came and stood urinating m the mosque. The Companions of the Messenger of Allah said, ‘Stop it! Stop it!’ But the Messenger of Allah said, ‘Do not intercept him; leave him alone. ’ So they left him until he had finished urinating, then the Messenger of Allah called him and said to him, ‘In these mosques it is not right to do anything like urinating or defecating; they are only for remembering Allah, praying and reading the Qur’an,1 or words to that effect. Then he commanded a man who was there to bring a bucket of water and throw it over (the urine), and he did so.”

The principle which the Prophet (SAW) followed in dealing with this mistake was to treat the man gently, so as not to be harsh with him. Bukbari reported from Abu Hurayrah (RA):

“A bedouin urinated in the mosque, and the people got up to stop him out. The Messenger of Allah said to them, ‘Leave him alone, and throw a bucket of water over it. You have been sent to make things easy for people, not to make things hard.’”61

The Sahabah (may Allah be pleased with them all) were very keen to denounce the bad thing they had seen and to keep their mosque clean and pure, as is indicated in the various reports of this hadith, which describe them as shouting at him, getting up to sort him out, rebuking him and hastening to deal with him, or telling him to “Stop it'”62

But the Prophet (SAW) was thinking of the likely consequences of the two options — stopping him or leaving him alone. If they tried to stop him, forcing a man to suppress his urination could do him harm, and if he was unable to stop but moved away because he was afraid of them, the impurity would be spread over a wider area of the mosque and on the man’s body and clothing. The Prophet (SAW) had the farsightedness to see that leaving the man alone until he had finished urinating was the lesser of the two evils, especially since the man had already started doing it, and it was a problem that they would be able to do something about by cleaning afterwards. So he told his Companions to leave him alone and not to interrupt him. He told them to leave him alone because this was in the better interests of all and would ward off a worse evil by putting up with the lesser evil.

It is also reported that the Prophet (SAW) asked the man the reason for his action. At-Tabarani reported in al-Mujam ai- Kabeer that Ibn ‘Abbas (RA) said:

“A bedouin came to the Prophet and pledged allegiance to him in the mosque. Then he went away and started to urinate. The people wanted to stop him, but the Prophet said, ‘Do not stop a man when he is urinating,’ Then he asked him, ‘Are you not a Muslim?’ He said, ‘Of course, yes.’ He said, ‘What made you urinate in our mosque?’ He said, ‘By the

One Who sent you with the truth, I thought it was just like any other place so I urinated in it.’ The Prophet called for a bucket of water and poured it over the urine ”63

This wise manner of dealing with the problem had a far- reaehing effect on the bedouin, as is clear from his reaction. Ibn Majah reported that Abu Hurayrah said:

“A bedouin entered the mosque where the Messenger of Allah was sitting, and said, ‘O' Allah, forgive me and Muhammad, and do not forgive anyone else.’

The Messenger of Allah smiled and said, ‘You are narrowing something vast.’ Then (the bedouin) went away to the furthest part of the mosque, opened his legs, and began to urinate. After he had learnt better, the bedouin said, ‘He got up, may my mother and my father be sacrificed for him, he did not rebuke me or insult me. He just said, ‘We do not urinate in this mosque; it was only built for the remembrance of Allah and for prayer.’ Then he called for a bucket of water and poured it over the urine.’”64

Ibn Hajar (RA)mentioned in his commentary a number of things we learn from the hadith about the bedouin, among which are the following:

—            We should be gentle when dealing with one who is ignorant and teach him what he needs to know without rebuking him, so long as he is not acting out of stubbornness, especially if he is one who needs to be won over.

—            Prophet (SAW)was kind and he dealt nicely with him.

—            The idea of taking precautions against impurity (najasah) was established well in the minds of the Sahabah, which is why they hastened to denounce it in the presence of the Prophet without first asking his permission. The idea of enjoining what is good and forbidding what is evil was also established well in their minds.

—            We should also hasten to remove anything objectionable when there is nothing to stop us from doing so, because when the man had finished urinating, the Prophet (SAW) issued instructions that the place should be cleaned with water.

NBK’s economic update reports Kuwait inflation at 3.3% in May

Amid a slowdown or stabilization across all components except healthcare and local food, inflation in the consumer price index (CPI) inched down from 3.4 percent year-on-year (y/y) in April to 3.3 percent y/y in May. Although relatively low, local food inflation climbed at a gradual pace for the third consecutive month. Local food inflation is expected to remain soft in the second half of this year with the International food prices declining as well. In order to limit any significant inflationary gains, the stronger dinar is also projected. The average annual inflation rate is forecast to close to 3.5 percent in 2015.

Core inflation (CPI excluding food items) eased for the second consecutive month in May, from 3.7 percent y/y in April to 3.5 percent y/y. Core inflation is seeing some reprieve because of subdued inflation across most components. Housing inflation is also expected to ease modestly in the near-to-medium term which will help keep core inflation in check. Inflation is off and now under 2 percent y/y excluding housing (and food).

Global food prices declined by 17.5 percent y/y and Inflation in the local food price index edged up from 2.3 percent y/y in April to 2.6 percent y/y in May. The rise in local food inflation may be due to the increased demand in the run-up to the holy month of Ramadan in June.

Local Food inflation will remain soft in the second half of 2015 because international food prices are still declining. Inflation in housing services remained unchanged from April at 6.3 percent y/y. This inflation component is updated once every quarter with the next update due in the June report.

Due to healthy demand levels, Housing inflation rose to an almost six-year high in March though it is expected to subside later in 2015. Clothing and footwear inflation declined by almost 1 percent and furnishing and household maintenance inflation remained comfortable. Since most of the products in this segment are imported and the dinar has remained strong the inflation is trending lower for a year. The inflation of 'other goods and services' was down to 2.4 percent y/y in May from 2.7 percent y/y in April.

Prophets Methods of Correcting Mistakes - Not hastening to tell someone he is wrong

Something happened to ‘Umar (RA) which he himself told about: “I heard Hisham ibn Hakeem ibn Hizam reciting Sooratal- Farqan during the lifetime of the Messenger of Allah. I listened to his recitation, and he was reciting it differently to the way that the Messenger of Allah  used to recite it. I nearly interrupted his prayer, but I waited until he had said the salam, then I grabbed him by his cloak and said, ‘Who taught you to recite this Soorh I heard you reciting?’ He said, The Messenger of Allah taught me to recite it.’ I said, ‘You are lying! The Messenger of Allah taught me to recite it differently/ I took him to the Messenger of Allah and said, I heard him reciting So oral al- Furqan differently than the way you taught me to recite it ’ The Messenger of Allah  said,

‘Let him go. Recite, O’ Hisham.’ He recited it as I had heard him recite it. The Messenger of Allah said,

This is how it was revealed.’ Then he said, ‘Recite,

O' ‘Umar.’ So I recited it as he had taught me. The Messenger of Allah said, This is how it was revealed. This Qur’an was revealed with seven ways of recitation for ease, so recite it in the way that is easiest to you.’58

Among the educational methods we learn from this story are the following.

—            Telling each one to recite in front of the other and approving their recitation was more effective in confirming that both were correct and neither was wrong.

—            When the Prophet (SAW) told ‘ Umar to let go of Hisham. this was preparing both parties to listen in a calm manner. This was an indication that ‘Umar had been too hasty.

—            A person who is seeking knowledge should not be too hasty to condemn any opinion that differs from that with which he is familiar; he should first be sure of what he is saying, because that opinion may turn out to be a valid scholarly opinion.

Another relevant point is that one should not hasten to punish someone who makes a mistake, as we see in the following story.

An-Nasa’i reported from "Abbad ibn Sharhabeel who said:

“I came with my (paternal) uncles to Madeenah, and we entered one of the gardens of the city. I rubbed some of the wheat, and the owner of the garden came and took my cloak and hit me. I came to the Messenger of Allah asking for his help. He sent for that man and they brought him to the Prophet. He said to him, ‘What made you do that?’ He said, ‘O’ Messenger of Allah, he went into my garden and took some of my wheat and rubbed it.’ The Messenger of Allah said, ‘You did not teach him if it was the matter of him not knowing, and you did not feed him if it was the matter of him being hungry. Give him back his cloak.’ And the Messenger of Allah ordered that I should be given a wasq or half a wasq (measure of wheat).”59

From this story we learn that we should find out the circumstances of the one who is making a mistake or acting in an aggressive manner, so that we may know the right way to deal with him.

                                                          The Quality Chain
We may also note that the Prophet (SAW) did not punish the owner of the garden, because he was in the right but he had handled the matter wrong. He pointed out to him that the way he had dealt with someone who did not know was inappropriate in such circumstances, then he taught, him how to handle the matter properly, and told him to give back the garment he had taken from the hungry man.