Benefits of Life Insurance [Archives:2000/12/Business & Economy]

March 20 2000

Nageeb Baggash

The idea of prohibiting the system of insurance concentrates on life insurance because it is against Allah’a wish and fate. This issue is very serious to be discussed.
Life insurance is the most useful type of insurance because it offers great services and advantages to people. It is wrong to evaluate or judge it by its name or by the general definition heard or imagined by us. We should study it and know its types and its benefits. The title “life insurance” is a collective name for the different types of insurance which are in connection with a person’s life, ability and activity and his continuity. Its aim is not to prevent Allah’a wish and fate, as some understand it. It is also not made for the sake of preventing death or stopping the occurrence of injuries and harms. It deals with the influences of injuries and harms on the insured people. Its work is to reduce losses and damages resulting from an accidental occurrence of damages, not before. If no accident has taken place, the insured will not benefit from this type of insurance along the declared period. 

Moreover, insurance including life insurance concerns with expected risks, not actual risks. In other words, it covers anticipated risks that possibly to happen to the insured. As we know, death is a real phenomenon and no one can avoid it. Death is not a risk to insure against it Here, insurance deals with the issue of stopping a person’s activities in life. Indemnity will not be paid to him but to his relatives. What is more, life insurance does not cover natural diseases which may attack the person’s health. In fact, it covers damage and injuries that result from incidents and calamities with certain clear provisions and exclusions, agreed by the two parties and declared on the faces of policies. Thus, we must take these benefits into account to be able to give real and true opinion about this type of insurance. Prohibition of things must be based on the religious instructions and teachings. If we see that the exercise of life insurance is in contradiction with Islamic instructions or against the people’s interests, we must leave it. If it is advantageous, there will be no reason to leave or prevent it.

To give you a clear idea about life insurance, I shall give a good definition about it. Life insurance may be defined as a plan under which large groups of individuals can equalize the burden of loss from death by distributing funds to the beneficiaries of those who die. From the individual standpoint life insurance is a means by which an estate may be created immediately for one’s heirs and dependents. In the developed countries like US, UK and Japan life insurance policies in force exceeded the national income. The same is true of other countries, in which life insurance has become a major channel of saving and investment, with important consequences for the national economy. Benefits of life insurance can be more known through its classification. It can be classified either according to contracts or according to type of customers. According to the type of consumers it is classified as ordinary, group, industrial and credit. Under group life insurance, for example, an employer signs a master contract with the insurance company outlining the provision of the plan. The amount of insurance depends upon the employees’ salary or job classification. Usually the employer pays a portion of the premium and the employee pays the rest, but sometimes the employer pays the entire cost of the plan. A major advantage of group life insurance to an employee is that usually he may obtain coverage regardless of his health. An employee can benefit from life insurance in paying the cost or expenses of treatment in the case of any accidental occurrence. Almost all the claims under life insurance find acceptance from the insurers. That is because life insurance exclusions of risks are very little in comparison with other types. It excludes coverage to losses or damage caused as a result of risks against human nature, as suicide and self-inflicted harm.

Let’s compare the situation of both a person who has life insurance policy and another without it. The two are employees with defined salary for each. Suppose an accidental treatment and the supply of artificial limbs. Then the amount of indemnity must be stated according to the type of injury and its influence, whether it causes temporary incapacity or permanent incapacity to the insured. In the event of his death, the heirs will receive the declared compensation, which may help them much. The second person, who does not have life insurance policy will have different situation. He may not find the expenses of treatment or he may borrow them from others. If he dies, he may leave nothing to his children.
To conclude, life insurance is very useful for all people because it offers great benefits. Our Islamic figures have to study it carefully before passing judgement on it. If they do, they will not find any reason to prohibit it. Life insurance is not against Allah’a wish and fate, as some claim.