Permissibility of Insurance Policies

Question :

Do you agree that insurance policies are permissible?

Answer :

Bismillah ar Rahman ar Rahim
Alhamdu Lillahi Rab al Alamin, wa al Salatu wa al Salamu ala Sayyidina Muhammad,
wa ala Aalihi wa Sahbihi Ajma'in

Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh

Insurance contracts with commercial companies are controversial. Some scholars believe they are permissible with conditions on the ground that they are new contracts that are beneficial. Others argue that they are not permissible because they include a great deal of ambiguity regarding the responsibility of the parties being dependent on the unknown.

The conditions required according to the first group of Scholars are:

1) the contract must not be based on interest

2) the object of insurance must be permissible in our religion.

I stand with this group. Consequently, if insurance is not based on interest and if the object of insurance is permissible, the insurance contract with commercial companies is permissible. This means that car insurance, accident, hazards, employment, health, and term life (also some other kinds of life insurance that are not interest-based) insurance are permissible. According to the second view one has to change the structure of insurance provider and the nature of premiums paid in order to make insurance provision on cooperative basis and premiums on donation basis to make insurance contracts permissible.

Wa Allahu A'alam
Wa Alhamdu Lillahi Rab al Alamin
Wassalam

Prof. Dr. Monzer Kahf

Source : monzer.kahf.com (The Fatawa)