Is Zakaat payable on the premiums which an insurance policy holder or a member of a medical scheme pays?

Answer

Trade Insurance

As far as trade insurance and the like, excluding medical insurance, is concerned, Zakaat is payable on the sum of the premiums paid to the insurance company. However, Zakaat is not Waajib on the premiums immediately. Once the money has been received from the company when the policy matures, only then will Zakaat be payable. But then Zakaat will have to be paid for the past years as well. It is therefore better to pay Zakaat on the premiums annually. Furthermore, it should be remembered that all forms of insurance are Haraam.

Zakaat is not payable on these premiums immediately or annually because, despite ownership being retained, possession is eliminated.

The owner does not have possession of the money nor is he able to take possession.

Premiums in an insurance company are not like savings in a bank. The owner has the right and ability to utilize his bank savings whenever he wishes. This is not the case with insurance premiums. Possession is totally eliminated, and the owner is deprived of the utility and benefit of his money. He has effectively loaned the money to the insurance company who invests it on interest, and who will repay it either at death of the policy holder or whenever the policy matures. There is therefore no resemblance with bank savings.

Medical Insurance

Regarding the premiums of medical insurance, the situation is vastly different. The whole premium paid does not belong to the paying member of the medical insurance scheme. Almost two thirds of the premium is gobbled up by the medical insurance company. The medical scheme usurps about two thirds. Only one third (approximately) is retained for the member. This third is deposited into a 'savings' account called MSA which is not a normal or conventional savings account. The member has no access to the MSA. Money from this account is utilized by the medical insurance entity to pay for the member's medical expenses.