Question
I would like to find out about the permissibility of taking out life insurance only to pay the estate duty/tax.
Answer
Life insurance is totally prohibited under Islamic Law as it entails aspects that are regarded to be gambling and interest in Islam and both these have been prohibited in Quraan with severe warnings.
It would therefore be impermissible to take out optional life insurance for any reason what so ever. One could opt for other permissible ways of avoiding the estate tax using the services of an experience estate planner. However, his solutions should be given to a Mufti to look over as the laws of the country differ with the Islamic laws regards trusts, gifts, saving in others accounts etc.
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.
References
ا زندگی اور املاک کا انشورنس اصلا جائز نھیں ہے کہ اس سے سود بھی ہے اور قمار بھی
(۴/۷۷ جدید فقہی مسائل)
زندگی کا بیمہ ناجائز ہے
(۶/۳۹۱ افتاوی محمودیہ)