Life insurance is protection against financial loss resulting from death. It is not possible to establish a single definition of life insurance but there are hundreds of ways to explain it. In a simplest term, life insurance is the protection against financial loss resulting from sudden death. The primary goal of every person is to secure the future of his family and protect it from every uncertainty, which may harm his life. Everyone dreams of a prosperous life for his family, a bright future for his children, a comfortable old age without depending upon others and leaving behind something for the heirs to enable them to continue the life with dignity and self-respect. The life insurance sells the security or guarantee for materializing these dreams and a policy holder buys it by paying money.

This security is called “life insurance”
The dream plan is called “policy”
The one who is selling the dreams is called “the insurer”
The one who is buying the security of his dreams is called “the insured”
The money which the insured pays to buy the security is called
“the premium”
The money which comes as the reality of the dreams at the end is called “the sum assured”

Gone are the days when the basic necessities of life were supposedly a responsibility of the Baitul Maal, Khalifah, King, Government or charity organisations. As the population is increasing enormously, resources of life are shrinking alarmingly; the world is governed by man-made laws, so the greed of power and money has cultivated corruption in every walk of life. Food, water, health, housing, education, social services and peaceful atmosphere are no more easily available. Even clean, fresh and unpolluted breathing is not free. It has become dif.cult to live with prosperity without two to three earning members in the family. If there is only one earning member in a family and he meets any misfortune like accident, death, job termination, disability, etc. then one can imagine the hardship that could befall on his family. Here comes life insurance as a rescue.
Life insurance can not compensate the cost of the life of a man if he dies or meets an accident. It can only compensate a few .nancial losses so that the family of the deceased person need not beg for .nancial help until the other members of the family stand on their own feet.
Those who are striving hard to meet the demands of life without planning for insurance are like a ruthless driver who is driving a car without mirrors to view the back and the sides, or like a driver who does not care for speed breakers or traf.c signs.

Every human being is born with two commitments.
1. Individual commitments to himself as well as to his family like:
• Providing comfort to the family.
• Giving proper bringing up and education to the children.
• Getting them settled and accomplishing their marriages.
• Not becoming a burden on anyone during old age.
• Endeavouring to secure an alternative source of income for the family in case of untimely death or disability, etc.

A Hadith of the Prophet Mohammad ﷺ can be appropriately quoted here: “Alaa Kullukum Raa’in wa kullukum mas’oolun ‘an ra’yyetih” (Be aware, all of you are responsible like a shepherd who is responsible for his herd and everyone of you will be accountable for his subordinates.)

2. Social commitments towards other human beings. This includes:
• Helping the poor, sick, handicapped, orphans, widows, help­less and those who are under debts.
• Contributing to social services, national integrity, public  welfare, etc.

Over 250 verses from the Holy Quran can be quoted in which there
are teachings to spend as much as possible for the above.

Life insurance, if studied in depth, is a short cut to fulfill both the above noble commitments. By paying premium, a man fulfills
his individual commitments. By collecting the premiums from large number of people, the insurance company with the help of the government, or in other words, the government with the help of the insurance company runs various projects of social welfare, national development, country’s infrastructure, education, etc. Thus the second commitment of the person is fulfilled collectively on the basis of “help yourself by helping others”.

The simple procedure is that the government utilises the liquid cash for various welfare schemes, educational programs, research centers, construction of roads and bridges, power plants, agricultural developments, etc. In return, the government pays suitable interest (a debatable subject which is discussed in detail in the chapter ‘Misconceptions – Riba’) so that the premium payers are not deprived of their profit. If the person buys shares or takes partnership in a business, he would earn a great deal of profit in a few years time, therefore it is logical to compensate him equally if he invests money in life insurance by buying the policy.

Also, with the help of the premiums, Life Insurance Company helps those poor farmers, labourers, handicapped, etc. who are willing to buy the insurance but cannot, because of poverty. The insurance company includes them in ‘Group Insurance’ policies and subsidises. This helps in building integrity, humanity and brotherhood among the countrymen as only afew people pay the premium but lot of others get benefited from it. This is perfectly in accordance with the Islamic teachings:

تَعَاوَنُواْ عَلَى الْبرِّ وَالتَّقْوَى وَلاَ تَعَاوَنُواْ عَلَى الإِثْمِ وَالْعُدْوَانِ
سوره المائدة:5 , آيت:2 , جزء من الآية

“And help each other in Al-Birr (piousness) and At-Taqwa (virtue, righteousness and piety); but do not help each other in sin and transgression.”
Chapter 5: Al-Mai’dah, part of Verse 2.

Helping others irrespective of their religion, cast and creed is an Islamic principle. The Baitul Maal of early Islam had no distinction between a Muslim, a Jew and a Christian.
Technically speaking, insurance is a socio-economic device which implies sharing of losses sustained by some members of the country by all the citizens of a country. It provides economic security against loss of life, property or pecuniary interest. Therefore, insurance as a system is acceptable to Islamic Society as it resembles the concept of Baitul Maal.