Considering Insurance

بِسۡمِ ٱللهِ ٱلرَّحۡمَـٰنِ ٱلرَّحِيمِ

The following is by Shaykh Nur ad-Din Abu ‘Ubadah ‘Ali ibn Juma’ah. 

Since insurance in its various forms is a novel transaction which the shari‘ah has not provided specific evidence concerning their legality or lack thereof – in this respect it is like bank transactions – engaging in it falls under the judgement of scholars and their research deduced from the general meaning of textual evidence, such as Allah (s.w.t.) Saying: 

سُوۡرَةُ المَائدة

... وَتَعَاوَنُواْ عَلَى ٱلۡبِرِّ وَٱلتَّقۡوَىٰ‌ۖ وَلَا تَعَاوَنُواْ عَلَى ٱلۡإِثۡمِ وَٱلۡعُدۡوَٲنِ‌ۚ وَٱتَّقُواْ ٱللَّهَ‌ۖ إِنَّ ٱللَّهَ شَدِيدُ ٱلۡعِقَابِ (٢) 

… Help you one another in righteousness and piety, but help you not one another in sin and rancour: fear Allah: for Allah is Strict in Punishment. (Surah al-Ma’idah:2) 

The Messenger of Allah (s.a.w.) said, “The example of believers in their love, sympathy, and compassion for one another is similar to the example of a single body: when a single part complains it calls upon the others vigilance and for defense.”  And there are numerous other texts on this topic. 

Scholars have two opinions on the permissibility of insurance.  One group of scholars considers it an unlawful transaction because of its inherent risk, gambling, betting, and unlawful increase, riba’.  The other group considers it permissible since it stands upon a foundation of social responsibility, and assisting one another in acts of piety, and at its root is voluntary charity – not compensation.  They are not among the contracts unlawful due to inherent risk since it is a contract to give voluntarily.  It is not a contract for exchange – and thus nullified by risk – since its risk does not lead to disputes between the various parties because people make frequent use of it. 

Furthermore, it is widespread amongst the masses, spreading to all facets of their economic activities.  And what people hold good and consent to without it leading to dispute is not forbidden.  It is established, in the shari’ah, that voluntary charity contracts can involve much risk, unlike exchange contracts such as buying and selling should not involve risk.  The legal maxims maintained in such disputable matters are as follows: 

Firstly, objection is reserved for omitting what is agreed to be a requirement, and performing something that is agreed to be unlawful.  Objection is not for issues where there is a difference of opinion. 

Secondly, it is recommended to remove oneself from controversial issues. 

Finally, whoever is afflicted with something controversial must follow the opinion of those who permit it. 

Based on the above, there is no objection in entering into insurance contracts and following the opinion of those who permit it.  It is preferable to avoid it as a means of piety.  However, it is not permissible for any of the two groups to deny the act of the other as long as it is a disputable matter.