Zakat on Aviva Life Insurance Plan

Question:

Is there Zakat on Aviva Life Insurance Plan?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 The Answer:

Zakat is not binding on the premiums paid to the policy.  More importantly, life insurance policies are prohibited.  Entering into such contracts without any legal requirement or necessity is prohibited and sinful.

The Fiqh (jurisprudence of the answer):

An insurance contract is a bilateral contract whereby the insurer promises and undertakes, in exchange for consideration called premiums to make a payment to either the insured or a third party if a specified event occurs[1].

Insurance contracts contains elements of interest (Riba), gross uncertainty (Gharar) and gambling (maysir).  Thus, an insurance contract is an irregular and voidable (fāsid) contract in Shariah.

A voidable (Fāsid) contract results in the transfer of ownership of the counter values upon possession.  Thus, a policy holder loses ownership of the premiums.  Therefore. Zakat is not binding on the premiums.

Additionally, one should rescind and cancel such a policy as soon as possible to free themselves of being involved in contract of interest, gambling and gross uncertainty.

We encourage Insurance firms to consider setting up Shariah compliant windows for Takaful products as an alternative to Insurance for Muslims.

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam
Shariah Advisor
Amanah Finance Consultancy

[1] http://ec.europa.eu/justice/contract/files/expert_groups/definition_of_insurance_contract_en.pdf


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