The ruling concerning commercial insurance | The official website of Sheikh Muhammad Ali FERKUS
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Tuesday 7 Shawwâl 1445 H - April 16, 2024 G

Fatwa: 119

Category: fatwas about selling and monetary transactions

The ruling concerning commercial insurance

The question:

We are a group of workers in a company and when we want to buy a new car from one of the agents or representative distributors in selling cars with facility of payment, we should pay a sum estimated at 30 % of the car’s cost as a first installment, then we pay the rest of the installments. In addition, we pay a sum for car insurance in an insurance company in a way we cannot avoid two things:

The first: we take out comprehensive car insurance and we are totally indemnified in case of accident.

The second: which is the subject of the question, is called life insurance, in a manner that the insurance company pays all the remaining installments in case of death. So what is the ruling of the Sharia regarding this issue?

The answer:

All praise is due to Allah, the Lord of the Worlds. Peace and blessing be upon whom Allah sent as a mercy to the Worlds, upon his Family, his Companions and his Brothers till the Day of Resurrection.

Know that insurance in all its forms, whether on persons or things is forbidden by the Sharia, as it contains many forbidden things like wrongfully consuming people’s property, Gharar (uncertainty), gambling and others, Allah عزَّ وجلَّ said :

﴿وَلاَ تَأْكُلُوا أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ وَتُدْلُوا بِهَا إِلَى الْحُكَّامِ لِتَأْكُلُوا فَرِيقًا مِنْ أَمْوَالِ النَّاسِ بِالإِثْمِ وَأَنْتُمْ تَعْلَمُونَ﴾ [البقرة: 188]

The meaning of the verse:

And eat up not one another's property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.), nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully.﴿ [Al-Baqara (The Cow): 184].

Indeed, the Prophet صلَّى الله عليه وسلَّم forbade the selling in which there is uncertainty(1), in addition to the fact that the insurance company concludes insurance contracts and gets investment gains, though it provided nothing to the insured person, but it only had a contract with him which consists in indemnifying against a possible danger. This is in fact, an imposition that the Sharia did not impose, besides the insurance company did nothing for the insured person. For this reason, this kind of contracts is forbidden -if they are not imposed upon the person-, whether they are related to a selling or other, since it is a helping in sin and transgression.

The perfect knowledge belongs to Allah عزَّ وجلَّ. Our last prayer is all praise is due to Allah, the Lord of the Worlds. Peace and blessing be upon our Prophet صلَّى الله عليه وسلَّم, his Family, his Companions and Brothers till the Day of Resurrection.

Algiers, Dhu Al-Qa`da 24th, 1426H.
Corresponding to: December 26th , 2005.

(1) Reported by Muslim, chapter of “Selling” (hadith 3881), Abu Dâwûd, chapter of “Selling” (hadith 3378), At-Tirmidhi, chapter of “Selling” (hadith 1275), An-Nassâ’i (hadith 4535), Ibn Mâjah, chapter of “Trades” (hadith 2278), Ahmad (hadith 9119), Ad-Dârimi (hadith 2609), Ad-Dâraqutni (hadith 2879) and Al-Bayhaqi (hadith 10720) on the authority of Abu Hurayra رضي الله عنه.