How Should Life Insurance from My Late Husband Be Distributed?
Shafi'i Fiqh
Answered by Shaykh Muhammad Carr
Question
Does the life insurance from my late husband’s workplace need to be divided among his family and me? If so, how should it be distributed, considering he has only a father and a brother in his family?
Answer
In the Name of Allah, the Most Merciful and Compassionate.
Thank you for reaching out and seeking clarification on this important matter.
As a first step, it is crucial that you access the policy payout and ensure that it is paid into an account that you have access to.
The Nature of the Insurance Payout
It is permissible if the life insurance policy adheres to Islamic principles and is structured in a Shari‘a-compliant manner.
Moulana Taha Karaan states,
“If it is a cooperative insurance, the designated beneficiaries may benefit from it without compunction”. [MJC Position on Succession Law and Related Matters]
If the insurance is impermissible, as much as the payout equates to the premiums paid will constitute part of the estate. The remainder is unlawful and must be given in charity. [Ibid.]
Disposing Unlawful Wealth
- This charity must either be given towards a charitable cause that benefits the public at large, such as public hospitals, schools, or mosques; or
- It should be given in charity to a person who is entitled by his need to receive charity. [Nawawi, al-Majmu‘ Sharh al-Muhadhdhab; Karaan, Disposal of Riba (Fatwa issued by the MJC)]
This impoverished individual could very well be a family member, and this would constitute a lawful way of accessing the policy after it has been restructured—not as a policy payout but as an act of charity.
The Maliki Position
According to Maliki Madhhab, the policy payout is permissible and forms part of the inheritance. The renowned scholar Muhammad Ulaysh al-Maliki said:
“There is a difference of opinion regarding wealth earned through unlawful means, such as interest (riba) and invalid transactions: if the one who acquired it dies, is it permissible for the heir to take it? The relied-upon view is that it is permissible. However, for the specific unlawful wealth whose rightful owner is known, such as stolen or usurped property, it is not permissible for the heir to take it.” [‘Ulaysh, Minh al-Jalil Sharh Mukhtasar Khalil]
Distribution Certificate
You should consult your local Islamic judicial authority or scholar regarding the potential heirs, after which they will issue you an official redistribution certificate.
I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Dr. Mohammad Abu Bakr Badhib
Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.
In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.