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What to Do With the Return from the Conventional Insurance?

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Question:

I recently terminated my conventional insurance policies, which I have had since my teenage years, not too long ago. From those policies, I received cash bonus and the surrender value of my policy. The latter, as how I know it, is my principal money there. In fact, I received less than the premium paid.

With regard to the cash bonus, since this is riba-based, I am thinking of giving them away, as the money is haram for me but not to others. Is this permissible?

The bigger question I have is, can I give to my immediate family members who are financially struggling or who would benefit from extra financial support to manage their businesses? If I am to give away, I would like to help my family first, then give the rest to others in need. Or can I give the money so that that family member can go for Hajj? I take some comfort that the funds they are about to receive from me is not haram for them, but perhaps you can share some guidance on how best to manage this situation, that is permissible in our Shari’ah.

Answer:

It is permissible to take both ‘cash bonus’ and ‘surrender value’ if the total amount is equal or less than the premium paid. But if the total is more than what have been paid, then the excessive is considered as forbidden earnings.

Allah says in the Qur’an:

“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.” [Al-Baqarah, 278-279]

Ibn Kathir said that in the verse, Allah pointed to those who repent from interest that their original capital will not diminish. Rather, he will receive only what he lent without increase or decrease.

Ibn Abi Hatim also recorded that Amr bin Al-Ahwas said, the Messenger of Allah gave a speech during the Farewell Hajj saying:

“Verily, every case of Riba from the Jahiliyyah is completely annulled. You will only take back your capital, without increase and decrease. The first Riba that I annul is the Riba of Al-Abbas bin Abdul-Muttalib, all of it is annulled.”

As a conclusion, taking interest is prohibited and it must be avoided. If anyone makes tawbah and repents from taking interest, then he only allowed to take back the principal or capital since it belonged to him, but not the returns from the loan or investment. Whereas the forbidden earnings, as it is unlawful, thus it cannot be used for the benefit of the owner and it must be disposed off.

Shaykh ‘Atiyyah Saqar (former Head of Lajnah Fatwa Al-Azhar) said:

“It is compulsory to dispose off forbidden wealth while repenting by means of:

  1. Returning the wealth to the owner (if known) or to his beneficiary;
  2. When unknown, it should be handed to the faqir to separate it from oneself and not to gain deeds (from the surrender of the wealth).”

The proof on returning forbidden wealth to the owner (if known) or to his beneficiary is based on the following hadith:

The Prophet Muhammad used to say:

“Whoever transgressed the honour or whatever (wealth) of his brother, he should ask for forgiveness (and halal) from him at present until not a single dinar or dirham is left out. (Otherwise in the hereafter) if he had righteous good deeds, verily it will be taken from him equal to his transgression done and if nothing is left from it, then he will bear the bad deeds of his brother.” [Narrated by Al-Bukhari]

When unknown, it should be handed to the poor or the needy to separate it from oneself and not to gain deeds (from the surrender of the wealth). But some scholars opined that the use of forbidden earnings (whose the owner is unknown) should not be limited to the poor or the needy only. It can be disposed off by surrendering it to the governor via the zakat agency, Baitul Mal or any welfare bodies entrusted.

Referring back to the question, as for the forbidden wealth and what to do with it, the answer is as follows:

  • The forbidden earnings can be used for the benefit of the family members if they are in real need (faqir & poor).
  • Likewise if one is truly in difficulties, then it is permissible to use the earnings for business purpose.
  • The forbidden earnings cannot be used for performing hajj or umrah. The hajj or umrah that will be performed may look valid by way of fulfilling its rulings and conditions, but it may not be accepted because the money used for it came from unlawful sources.

Prophet Muhammad (peace be upon Him) reminded:

“Verily Allah is good and will not accept except for anything good.” [Narrated by Muslim]

Besides that, hajj and umrah are made obligatory for those who can afford. If someone is faqir or poor, then it is not obligatory for him to perform such as worship.

Allah says in the Qur’an:

“And [due] to Allah from the people is a pilgrimage to the House – for whoever is able to find thereto a way.” [Ali Imran, 97]

It is also important to stress here that spending the forbidden money on the poor, needy or in charity does not equal to alms or donations at all, because the source of the money is unlawful. But he will be rewarded for leaving the haram, insha-Allah. Allah accepts repentance from his servants who makes mistakes and Allah does not waste the reward of him who did a good deed.

Allah says in the Qur’an:

“So whoever does an atom’s weight of good will see it,” [Az-Zalzalah, 7]

The Prophet Muhammad (peace be upon Him) also said:

“Every son of Adam makes mistakes. The best among those who make mistakes are the ones showing repentance.” [Narrated by Al-Tirmidhi]

Allah knows best!

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