Answered by Shaykh Muhammad ibn Adam al-Kawthari
What is the ruling regarding a man who dies and leaves behind amongst other things life insurance money? Upon distributing the estate according to the sharia, is the life insurance money recognized as legitimate and included in the estate or is it not and left to the children to agree on its distribution.
In the name of Allah, Most Compassionate, Most Merciful,
If the money was received through a life insurance policy that the deceased held, then the respective inheritors will have to dispose of this money by giving it to charity and not using it themselves. Only the amount paid as premiums to the insurance company can be taken back, hence any extra amount will be considered unlawful and impure.
This amount will not be included in the total leftover wealth (tarakah) of the deceased which is to be distributed amongst those who qualify to inherit from the deceased’s estate. The remainder of the deceased’s wealth (after disposing of this amount) will be distributed according to the laws of Shariah.
However, scholars have permitted availing of the money received through such policies if the deceased did not willfully enter into a contract of life insurance; rather, a portion of his salary was deducted as premiums for a life insurance policy. But it should be remembered that if the deceased gave his consent to this, it would be treated in the same manner as willfully entering into a life insurance policy.
Also see the below link:
Is Deducted Life Insurance Money Halal? Please Explain
And Allah knows best
Muhammad ibn Adam al-Kawthari
Darul Iftaa, Leicester, UK