Answer
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
As for life insurance, it is permissible providing that it does not include interest and the insured material is permissible.
In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:
Death is never expensive. I assure you that you can die free 100%. Burial in some countries is expensive; this is a worry of the family of the deceased.
Life insurance is a separate issue whether burial is expensive or not. There are two opinions about insurance of all kinds including life.
I believe in the permissibility provided it does not have interest and what you insure is permissible (e.g., insuring a shipment of liquor is not permissible).
According to this view, term life insurance is permissible while life insurance which gives a definite amount after a number of years is not. If you live in America, there is a kind of life insurance for burial which is not based on interest.
Almighty Allah knows best.
Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.