Understanding and explanation of Life Insurance in Islam

Is it permissible to take out life insurance in Islam? Is there any evidence (daleel) or scholar's verdict relating to this question? 

Under common interpretations of Islamic law, conventional insurance is forbidden in Islam. Scholars such as Shaykh Ibn Baaz (may Allaah have mercy on him) criticise the system of conventional insurance as putting one’s money at undue risk to being lost and involving usury/interest.

Shaykh Ibn Baaz (may Allaah have mercy on him) was asked about life insurance, and he said: 

Insurance of one’s life or possessions is haraam and is not permitted, because it involves gharar (buying/selling something where it is not known whether what is being bought/sold will actually be achieved/delivered, or in what specific quantity, thus putting one’s money at undue risk to being lost) and riba (usury, interest). Allaah has forbidden all transactions that are based on riba, and all transactions which involve deceit, as a mercy to this ummah, and to protect them from that which may harm them. Allaah says (interpretation of the meaning):

“whereas Allaah has permitted trading and forbidden Ribaa” [al-Baqarah 2:275] 

And it was narrated in a saheeh report that the Prophet (peace and blessings of Allaah be upon him) forbade deceit. And Allaah is the source of strength.

Source : Fataawa Islamiyyah, 3/5