Question:
When I was a child, my father took out a life insurance policy in my name. Now, my father is elderly and not in his right mind. There is still one year left for the policy to mature. He asks whether it is correct or wrong to take the money.
Answer:
There are two aspects to this. First, the type of insurance. There are different types. Medical insurance is permissible. We encourage people to take government schemes like the Kalaignar Insurance Scheme or the Prime Minister’s Insurance Scheme for the elderly. These are funded from public taxes. For medical insurance, you pay a premium for the year. If you have a medical need, the company covers it; if not, the premium is gone. No interest is involved.
Similarly, vehicle insurance is also permissible. You pay a premium. If you have an accident, the insurance company pays for the damages. If you don’t have an accident, the premium is gone. There is no return.
The problematic type is life insurance. This is a form of savings. You pay a premium for a fixed term (e.g., 20 years). If you die during the term, your family gets the sum assured. If you survive, the insurance company returns the money you paid along with a bonus. That bonus is essentially interest (riba) . They may call it a bonus, but it is interest. Therefore, life insurance is not permissible.
Now, in this case, the father took out the policy when the son was a minor. The father may have been misled into thinking it was permissible. His ignorance is between him and Allahﷻ. However, the question now is: What should the son do, given that the policy is close to maturity and the father is unable to make a decision?
This is similar to a situation where a person, out of ignorance or lack of piety, takes a loan with interest. They have already entered into a contract. The general Islamic principle is that if you entered a contract in a state of ignorance, and later you repent and want to stop, you cannot unilaterally break the contract if it involves two parties. The other party (the insurance company) will not simply give up their claim. They have a legal contract. If you stop paying, you will lose all the money already paid.
In such a situation, where you are compelled (ikrah) by the existing contract, it is permissible to complete it. This is based on the principle in the Qur’an (e.g., 2:173, 5:3, 6:119, 6:145, 16:115) that there is no sin on one who is compelled, as long as he does not exceed the limit of what is necessary.
Here, the son is compelled by the agreement his father made. If he does not complete the payments for the final year, the entire sum will be lost. This is a form of compulsion. Therefore, it is permissible to complete the payments and take the money, even though it includes interest, because the original sin lies with entering the contract, and now he is compelled to fulfill it. The money that comes, including the interest portion, is for him, as the Qur’an states (2:275): “But whoever recants after his warning has come, then what is past is for him, and his case is up to Allahﷻ.“
