Paying Zakaat on Insurance premiums
Q. In the instance of Medical Insurance as in the case of UNIMED for teachers, does one have to pay Zakaat on the premiums paid over a year? Similarly, does one have to pay Zakaat on the premiums paid on Third Party car insurance as well? What is the case then of Zakaat on NIS premiums which is compulsory on all workers?
A. UNIMED (medical Insurance) which has been offered to teachers is a facility which has been introduced by the government where a teacher can receive discounts for medical reasons. It is not a savings or a facility in which the contributor can claim the amount that he has paid over the years, and it is not one in which the government will pay back a teacher, if he/she has not used the facility. Hence, seeing that a teacher has no hope of receiving the monies which he has contributed (as he would receive in a savings or investment), Zakaat will not paid on the premiums. Based on our understanding of UNIMED, it is a medical insurance service provided by the government to its teachers, who can use the facility to receive discounts on medical services. In this, there is no ‘giving- back’ of monies etc.
With respect to Zakaat on third party insurance or other types of car insurances, Zakaat will not be paid. The premiums paid towards these, are not a savings, but are paid towards a service which can be rendered to an individual. Monies paid, cannot be retrieved except that there is a legal claim in cases of accidents etc. In cases where there are no claims, the premiums paid are lost,and are not returned to the policy holder. Hence, seeing that an individual does not ‘get back’ the monies paid, Zakaat will not be liable upon car insurances.
As for NIS payments, in this also Zakaah is not liable. These are payments/premiums which stand as a form of social security and is paid to individuals after a certain period, in a specified manner. An individual who has made NIS contributions cannot demand that it be given to him whenever he wishes. Instead, the government has a system in place where NIS is paid as a form of pension or other benefits, in small amounts for a long or short period of time to an individual.
NIS premiums are not a savings with the government, nor is it a loan given to them. Instead, it is a system which the government has introduced to protect workers against the economic and social distress caused by a loss of earnings, arising out of work related injuries and other contingencies.
As such, due to the nature of NIS premiums, one will not be required to pay Zakaah on these while he is still making contributions. However, if he receives a lump sum (of the NIS benefits) after retirement etc., then he will have to pay zakaah if it has reached the Nisaab and one year has passed over it (whether it is treated separately or added to other monies).
Similarly, if after retirement, one receives NIS monthly pension, then if he adds this to his other savings and it has reached the Nisaab, he will have to pay Zakaah, once it crosses a year.
And Allah knows best.
Mufti Waseem Khan