Assalamu aleykum wa rahmetullahi wa beraketuhu.
The question is: let’s consider a person has a monthly gross salary of 1000 USD, and after deducting all mandatory government payments, he receives a monthly net salary of 750 USD. Now the government adopted a decree that allows a person to sign a life endowment contract with an insurance company that means a person agrees that every month 50% of his monthly gross salary (500 usd) will be transfered to the account of that insurance for the period of 36 months and only after 36 months is over, the insurance company pays back the total amount of the money collected in the account to that person (500 x 36 =18000 Usd). But the person cannot use that money for 36 months and during this period what the insurance company is doing with that money we do not know, Allahu Aleem. In addition, the insurance company pays additional 2% of the total amount at the end of 36 month period as a bonus (18000 + 2% = 18360.) but the person may refuse to take that 2% bonus if he does not want it, most people do not take that bonus becuase it is riba thus haram. If a person decides to stop the insurance contract before 36 months period end, let’s say a person paid 50% of his gross salary to the insurance company for 28 months then he wants to stop it) then all the government mandatory payment is deducted and the rest of the amount is given back to the person.
Is this type of insurance halal or haram from Shariah perspective?
From what we understand the benefit to the employee by joining this scheme is that they will save on mandatory government payments. Based on the information provided in the question, it will be permissible for the employee to make use of this scheme. This is provided that they do not take any amounts beyond what they are paying into the scheme as the additional amounts will be interest and thus unlawful, and provided that there are no other religious violations taking place which have not been mentioned in the question.
It seems that if the individual passes away during the 36 month period the family members may receive an additional pay out. If this is the case, these additional sums will also be impermissible to receive and must be disposed of by giving away to the poor without having any intention of reward.
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel