Zakah on the installments paid in a life insurance policy
31-10-2007 | IslamWeb
Question:
Dear Scholar – Asslam alaikum, I have a life insurance policy in India, lately only I came to know that it is forbidden and until now I am paying the premium. Now my question is that should I every year pay zakah for whatever the premium I made until then, as it is like a saving Jazzakumullahu khairan
Answer:
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
We have already clarified in Fatwa 81425 that commercial insurance is forbidden, so please refer to it.
You are obliged to cancel this insurance and avoid it, unless the installments that you paid are a big amount and you did not find a way to get them back except by continuing to pay some installments until you get the amount of insurance. However, you should get rid of the interests thereof by spending it on the general interest of the Muslims; this is to repel the greater harm by committing the lesser of two harms.
The Muslim jurists 
permitted some issues which are in principle forbidden in order to protect the money of the Muslim; they permitted, for instance, the money owner to deposit his money in a bank which deals with Riba (interest and/or usury) if he fears to lose it and he cannot protect it except by doing so, despite the fact that depositing money in a bank which deals with Riba is forbidden as one helps the bank in practicing Riba. They also permitted paying bribery in order to protect the money from being lost without right, although paying bribery is in principle forbidden. The Muslim jurists permitted such issues even though they are forbidden only to repel a greater harm.
You are not obliged to pay Zakah on the installments which you paid because you cannot get them back, but if you are able to get them back, then you are obliged to pay Zakah on it if it reaches the Nisaab (the minimum amount liable for Zakah) by itself or with other money which you have, and a whole lunar year elapses on it. For more benefit, please refer to Fatwa 86834.