My question is about life insurance. For a twenty years term, if a monthly amount is paid to a company (say, $100 each month) and said the company has agreed to pay $100,000 in case you are diagnosed with a critical disease (heart attack, cancer etc.) any time within these twenty years. At the end of the twenty years, if no claim is made (and by the grace of Allah, no disease hits you), then the company agrees to pay back 80% of your total payment ($24000, if $100 was monthly payment). 20% is non-refundable as the company needs this to pay for their operating expenses.
Is the above scenario Halal? (Considering the avoidance of total loss of your payments, thus not a gambling sort of deal). You are also securing yourself from begging to others in the case, God forbid, any disability strikes you due to a critical illness.
بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم
In the name of Allah, the Most Gracious, the Most Merciful
As a Muslim, one should have firm belief and reliance in Allah (swt) as he is the one who created human beings and our life and death is in his hands.
Life is surely a test from Allah (swt) and we learn this from the holy Quran. Allah mentions in the Quran: "He who created death and life to test you as to who is best in deed, and He is exalted in might, the forgiving”. (Surah Mulk, ayah 2).
In regards to the above question, especially life insurance, generally such actions and policies are interest-based and are a type of gambling, which in Shariah is completely prohibited.
Allah mentions in the Quran: "Allah has made transactions halal and made interest haram”. (Surah Baqarah, ayah 275)
So, looking from a Shar-ee perspective, life insurance is not allowed and the reason for the following is because such insurance is interest-based.
Only Allah knows best
Written by Maulana Belaal Ahmed
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham
 Fataawa Usmaani pg 314, vol 3