Life Insurance in Islamic Countries - Research Paper Example

Life Insurance In Islamic Countries Introduction Safety is important which everyone avails by different ways. Man loves his belongings and cares a lot for his life. According to Holy Quran: O ye you love money. Mans worry for his life encourages him to avoid peril he meets by different means. If these difficulties trap him, they will make trouble him and cost immense uncertainties Life Insurance is a tool people have been using right from the beginning to deal with the losses such as natural disasters etc. Insurance covers almost all types of risks (RIMS, 2012). Insurance has become a part of life. With large companies offering range of products to cover public losses. People are being offered insurance policies to safeguard their capital goods like immovable property and life and health insurance. Banks have established their offices in many Islamic countries like Jordan and many Muslim countries. Islamic law is a word taken from the Book of Guidance and Prophet Mohammad’s sayings and His doings. Individual activities are divided into following categories (Questions On Islam, 2012): 1. Obligatory 2. Compulsory 3. Less important 4. Reprehended 5. Unlawful Obligatory activities are those activities which include honoring business contracts, paying Zakat (giving contribution to the public) and regarding parents. Compulsory includes helping dear ones at the time of need. Less important made by legal businesses (Discipline, 2012). Reprehended activities are those activities which include hoarding of wealth. Unlawful activities are those as gambling products, pork and pornography. Islam provides flawless political and economic system for its inhabitants. To honor Islamic way of life insurance it is important to understand insurance and its products. There are two schools of thought on insurance: conservative and the modernists. The first one of the view that insurance of any kind is prohibited because it is an agreement based on doubts, it is against God’s commands and insurance business is based on interest. The modernist is of the opinion that any type of insurance is not based on usury. Rather insurers try to overcome the difficult economic outcome by defeating the risk. On the other hand Modernist argues that insurance reduces undesirable economic position done by certain fretfulness. Explanation of the question Life insurance is used to cover financial loss happening from death. It is impossible to define life insurance in a single definition as there are different ways to explain it. In simple words life insurance is a tool to safeguard against natural calamities. The aim of every individual is to secure his family from future risks. Every person dreams for prosperous life for his near and dear ones, a bright future for their children and self without depending on others. The life insurance guarantees materializing these aims by paying them in terms of money. The security is called life insurance where as dream plan is called policy. Person selling the dreams is called Insured and money being paid by insured is called Premium. There was a time when necessities of life were fulfilled by government or charity organizations. As the population increases the resources are shrinking day by day. World is being governed by man-made laws and lust for power and corruption is multiplying in every walk of life. Basic necessities like food, shelter, education and social services are no more available. Even fresh and unpolluted breathing is no more. It seems difficult to make both ends meet. Individual earning in a family when meets with any misfortune like natural death, Job termination, disability etc than one can imagine how he will cope with all this. Here life insurance is the only option available to avail in this situation. Individuals who are making their both ends meets without planning for insurance are like careless drivers, who are driving their cars without mirrors to view at their back and the sides. People are born with two commitments: Individual commitments: upbringing and education of their children. Providing his family with basic needs and avoid becoming burden on anyone. Then social commitments: towards fellow beings, helping needy, widows and helpers. Life insurance is a vast subject if studied it will give you a short- cut to fulfill above mentioned noble commitments. After collecting large sum of money from the public the insurance company with the government’s assistance can run various projects at national level. And the second commitment can be fulfilled collectively. Through all this government uses this cash for various schemes such as power generation, special education, employment generation etc. In return government pays suitable interest so that public should get their maximum profit at the time of maturity. If an individual starts a business in partnership he will get enough profit in few years. That’s why it logical to compensate him equally in terms of money invested in life insurance. Life insurance companies also help less privileged who are willing to avail the benefits of insurance but cannot because of poverty. What happens that these Life insurance companies include them in group insurance policies so that each and every individual of the society get benefit from its fruit. According to Dr. Mohammad Al Awwa: Life insurance is mutual cooperation in which both the parties agree to support one and other It seems that insurance is a cooperation to prevent what may undermine the welfare of parties. Again insurance is a tool to get relief from stress. Life insurance is not a new one. It was an idea given by the Western Bloc to minimize the loss that might create problem in a community in near future and it is as old as the human beings itself. Many scholars talked on life insurance and arrived at contrasting views. According to the late Prof. Mustafa Al- Zarka published in a book in Arabic. He shares his ideas about the insurance system and how does it works. He was of the view that all types of insurance, including life insurance is permissible (Al-Jazeerah, 2012). Life insurance is of two kinds: time Policy and bequest policy. Time policy includes payment by the party for a settled period for 20 years. In case he expires his family will receive considerable amount against death. If the insurer is lives at the time maturity his policy will lapse than he wills nothing. Insurer actually buys peace of mind at the time of agreement because after his death his dependents will have a large sum of money. The birthright policy is one in which funds invested by the life insurance partners themselves in which the policy holder receives handsome amount as well as other benefits if he is entitled under the terms of agreement made by policy holder. Both kinds of insurance are permissible from the Islamic point of view, as explained by Prof. Al- Zarqa provided that the insurer makes sure that the Company he invests in doing genuine business. The insurance company invests against the Islamic teachings than its policies become forbidden. According to modernist view insurance policy can be made in accordance with Islamic teachings where as conservatives oppose this idea. First Islamic insurance company was established in Sudan in 1979 and today it has been flourishing business. Organization of life insurances in Muslim countries consists of four regional offices, 26 zonal offices and around one hundred and one field offices with a network of four hundred sixty one local offices. An area office deals only in sales and marketing. Achievements of life insurance companies in Muslim countries are: State owned life insurance Company being gainful organization has paid Rs. 3 billion for various projects run by the government. Life insurance companies’ plays an important role in the economy of the state as it creates jobs for local and invests in huge funds in different sectors of the economy. The Life insurance organization being a catalyst satisfies its goal of making life insurance options available for every individual of the community. References: Al-Jazeerah: Cross-Cultural Understanding. (n.d.). Al-Jazeerah: Cross-Cultural Understanding. Retrieved June 24, 2012, from http://www.aljazeerah.info/ Discipline. (n.d.). JSTOR: An Error Occurred Setting Your User Cookie. JSTOR: An Error Occurred Setting Your User Cookie. Retrieved June 24, 2012, from http://www.jstor.org Questions on Islam. (n.d.). Questions on Islam. Retrieved June 24, 2012, from http://www.questionsonislam.com/ RIMS | Risk Management Magazine. (n.d.). RIMS | Risk Management Magazine. Retrieved June 24, 2012, from http://www.rmmag.com Turn To Islam islamic Muslim videos, articles and chat . (n.d.). Turn To Islam islamic Muslim videos, articles and chat . Retrieved June 24, 2012, from http://www.turntoislam.com Read More