Are Funeral Plans Permissible?
Answered by Shaykh Muhammad Carr
Question
With funeral costs rising, is taking out a funeral plan with a bank permissible? Some scholars say it resembles insurance and may involve interest. Can we use such plans?
ِAnswer
In the Name of Allah, the Most Merciful and Compassionate.
I pray you are in good faith and health. Thank you for your question.
Funeral plans provided by conventional banks are generally impermissible as they entail interest and gharar (contractual risk). Any arrangement that involves interest and gharar is impermissible. The Quran categorically prohibits interest. Allah says, ‘O you who believe, fear Allah, and completely discard any usury still due if believers you truly be.’ [Quran, 2:278]
The Prophet (Allah bless him and give him peace) prohibited the gharar sale. [Muslim]
On the other hand, insurance’s permissibility depends on its structure. If it is Sharia-compliant, it would be permissible.
Please also note that the estate generally bears the expenses in the absence of a funeral plan or equivalent.
Insurance – Shari‘a Perspective
Insurance, defined as implementing measures to protect against potential future risks or hazards, is firmly grounded in Sacred Law. Just as risk is an inherent aspect of daily life, safeguarding ourselves against such risks is equally natural and normal.
The crucial aspect lies in the method used to address these risks. Contemporary scholars generally agree that cooperative insurance, based on the Takaful model, is permissible.
Cooperative insurance occurs when a group of individuals mutually assist each other by contributing to a fund to compensate for the loss or damage caused by a hazard that could affect any one of them. [Karan, Medical Insurance]
A group of persons enters into a partnership; each individual contributes a specified amount; whoever is afflicted by any calamity is assisted from this collective fund; thus, each individual is considered an insurer and insured. [Ibid]
The nature and relationship between the contracting parties are the most important aspects of cooperative insurance. It most notably distinguishes it from commercial insurance. In a cooperative format, as stated previously, the legal roles of the customer and owner are united in one form, “members.”
And with Allah alone is our success.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Muhammad 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 for 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’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
