Is life insurance permissible in Islam? If so, is it considered inheritance for the children of the deceased? Would it then be liable for khums?
Enactment of a life insurance policy is considered valid and must be fulfilled as long as it is recognized to be a legitimate contract by rational people. As such, it is binding on both parties. Any compensation or payment that results from it is not considered inheritance. Instead, it is the property of the person(s) named in the contract. It would be liable for khums if it exceeds the beneficiary/recipient’s annual expenses.