Short answer
Conventional life insurance is not permitted in the mainstream Hanafi view, whether term or whole life, because it trades premiums for an uncertain sum and whole life policies also earn interest. Family takaful is the halal alternative. Muftis differ on cover that comes automatically with a job, so ask about that case.
Buying conventional life insurance by choice is not permitted, because of riba, gharar and its gamble-like nature. When it is compulsory or comes with employment, it may be kept; many muftis say the heirs may keep the amount of premiums paid and give the rest to the poor, and they differ on cover the employer paid for in full.
The four schools agree on this.
Explanation
With term life insurance you pay premiums for a set number of years, and your family receives a large sum if you die in that time; otherwise they receive nothing. Whole life insurance adds a savings part that grows with interest. In both, money is exchanged for an uncertain amount of money, which brings in gharar, maysir and riba.
Wanting to protect your family is good, not a lack of trust in Allah. The Prophet ﷺ told Sa'd that leaving his heirs well off was better than leaving them dependent on others. The issue is the contract, not the planning. Halal ways to plan:
- Family takaful, where available. See What is takaful?
- Regular saving and halal investing. See Are stocks halal?
- A written Islamic will, so your estate reaches your heirs quickly. Use the Islamic will builder.
- Clearing debts, so your family does not inherit them.
If you already hold a policy, ask a mufti. Common guidance is to cancel a voluntary policy, keep what you paid in, and give away any gain above it; if a payout comes to the heirs, they keep the sum of premiums and give the rest to the poor without intention of reward. Contemporary scholars of the four schools largely share the mainstream view, with a minority permitting conventional life insurance.
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Maaida 5:90
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
Gambling-like contracts are to be avoided.
Quran, Surah At-Talaaq 65:3
وَيَرْزُقْهُ مِنْ حَيْثُ لَا يَحْتَسِبُ ۚ وَمَن يَتَوَكَّلْ عَلَى ٱللَّهِ فَهُوَ حَسْبُهُۥٓ ۚ إِنَّ ٱللَّهَ بَٰلِغُ أَمْرِهِۦ ۚ قَدْ جَعَلَ ٱللَّهُ لِكُلِّ شَىْءٍۢ قَدْرًۭا ﴿٣﴾
And will provide for him from where he does not expect. And whoever relies upon Allah - then He is sufficient for him. Indeed, Allah will accomplish His purpose. Allah has already set for everything a [decreed] extent.
Provision for a family is ultimately from Allah, sought through lawful means.
Sahih al-Bukhari 1295
Sahih... إنك أن تذر ورثتك أغنياء خير من أن تذرهم عالة ...
"Leaving your heirs well off is better than leaving them poor and asking people for help."
Planning for your family's future is encouraged.
Sahih Muslim 1513
Sahih... نهى رسول الله صلى الله عليه وسلم عن بيع الحصاة وعن بيع الغرر ...
"The Messenger of Allah forbade the pebble sale and sales involving excessive uncertainty."
The uncertain payout makes the contract unlawful.
Where the ruling is recorded
- Jawahir al-Fiqh (Mufti Muhammad Shafi), Treatise on life insurance. Explains why conventional life insurance is impermissible.
- Resolutions of the International Islamic Fiqh Academy, Resolution on insurance and reinsurance. Rejects commercial insurance, including life cover.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.