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Saturday, September 26, 2009

Zakaat on Insurance Policies

Q: I read an article from Sanzaf that zakaat is payable on the lesser of the premiums versus the market value of the policy. Is this correct? My concern is that in the past I did not calculate my zakaat on in this manner; am I exempt from the past error because I was not aware of it?
A: It is our humble view that there is no zakaat on insurance policies because premiums that are paid into the policy are non-refundable. This means that these premiums have left one's ownership, so zakaat cannot be levied on such monies. You need to pay zakaat only on what is yours and in your possession. Furthermore, there is no guarantee that one would retreive that money in the future.
So I cannot understand how zakaat could be applied to premiums paid into an insurance policy.
And Allah knows best.
Mufti Siraj Desai