QUESTION:
As Salaamu Alaikum,
I have heard that life insurance is forbidden in Islam. If, at the end of the insurance period I get my premiums refunded WITHOUT any interest will this be permissible?
Also, with regard to my pension plan; if I can get my pension (in the form of contributions made) as a lumpsum WITHOUT the interest, will this be acceptable?
ANSWER:
Wa Alaikum As Salaam,
Yes, life Insurance is forbidden in Islam. Therefore, whatever is given as extra or in excess to your premiums will not be permissible for you to use. However, if your premiums are refunded to you without the interest, then it will be permissible for you to use since this is your money which you handed over to the Insurance Company as premiums.
With respect to your pension plan, if it is from a company/business you worked for, then it will be permissible for you to accept the contributions you made, as well as that made by your employer. Both will be permissible for you to use since these are lawful (Halal) contributions made towards the pension plan, (whether they are given in a lumpsum or over a period of time in regular payments). That which is given to you as interest must not be used since it is not permissible.
If the pension plan was taken out/purchased from an Insurance Company (which is normally referred to as an annuity plan), then you can only accept the premiums which you have paid. You cannot accept what is more than this since your premiums accumulate interest over a period of time which will be paid to you, and this is not permissible.
And Allah Knows best
(Mufti) Waseem Khan
22/9/2023