Inheritance on a policy

Question

As-salaamu alaykum, Does a life policy form part of the estate?
  1. Life policies in South Africa, with very few exceptions,[1] are structured on the basis of commercial insurance. Commercial insurance is not permissible in Sharīʿah.
  2. The total pay-out received on such a policy may be divided into two parts:
    • The principal sum: a sum equivalent to the total amount of premiums paid into the policy.
    • The insurance return: what remains of the total pay-out after subtraction of the principal sum.
  3. Of the total pay-out, the principal sum must be distributed according to the rules of inheritance. It may be not be allotted to one specific heir. In the case in question, assigning all of it to the wife is incorrect and prohibited according to the Sharīʿah.
  4. About the insurance return the opinions of the ʿUlamā differ:
    • The majority of the ʿUlamā deem this sum as ḥarām since it originates out of a prohibited contract. As such it can neither be given to one designated heir, nor distributed as inheritance between all the heirs. Rather, it must be disposed of as charity.
    • The Mālikī madhhab distinguishes between money which is intrinsically ḥarām (such as stolen property) and money that happens to have been earned in a ḥarām manner, and allows the latter category to be inherited by heirs.

:قال الشيخ محمد عِلِيْش في مِنَح الجليل شرح مختصر خليل 1/571-572

واختلف في المال المكتسب من حرام كربا ومعاملة فاسدة إذا مات مكتسبه عنه، فهل يحل للوارث – وهو المعتمد – أو لا؟ وأما عين الحرام المعلوم مستحقه كالمسروق والمغصوب فلا يحل له.

According to this view, the insurance return, like the principal sum, must also be distributed as inheritance between all the heirs, and may not be given to one sole designated heir.

  1. As can be seen from the above, neither of the mentioned views allows the entire policy pay-out to be restricted to the wife alone.
  2. Notwithstanding any directive by the deceased to the contrary—
    • the principal sum must be distributed between all the heirs according to their respective shares in the Sharīʿah,
    • the insurance return must either be given away in charity, or distributed between all the heirs according to the rules of inheritance under the Sharīʿāh.

والله تعالى أعلم

And Allah knows best.

MT Karaan

[1] To our knowledge, PPS is the only South African insurance company that provides life policies on the basis of mutuality that finds approval in the Sharīʿah.

MJC (SA)

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