What is the Islamic ruling on insurance?


Huzooraa was asked about the Islamic ruling on taking out an insurance policy to benefit from various perks and to cover the cost of any accidental loss in a business. Huzooraa, in his letter dated 11 April 2016, said:

“Only that kind of insurance is permissible where the sum is based on the condition of sharing profit and loss and does not contain any aspect of gambling. If it is only based on profit, it is impermissible as it would be interest-driven.

“Similarly, if a policyholder makes an agreement with a company that he will only receive the savings and will not take any interest on them, then there is no harm in buying such an insurance.”

“On the issue of insurance, the Promised Messiahas said:

سود اور قماربازی کو الگ کر کے دوسرے اقراروں اور ذمہ داریوں کو شریعت نے صحیح قرار دیا ہے۔ قماربازی میں ذمہ داری نہیں ہوتی۔ دنیا کے کاروبار میں ذمہ داری کی ضرورت ہے۔

‘With the exclusion of interest and gambling, the Shariah has permitted other agreements and responsibilities. There is no responsibility in gambling. Responsibility is, however, necessary in worldly trades.’ (Badr, No. 10 , Volume 2, 27 March 1903, p. 76)

“Hazrat Khalifatul Masih IIra said in a speech:

‘If a company lays the condition that the policyholder and the company will share the profits and losses, then insurance may be permissible.’ (Al Fazl, 7 January 1930)

“In a reply to a letter, Hazrat Musleh-e-Maudra dictated:

‘It is not correct that we declare insurance impermissible because it involves interest. At least I do not declare it impermissible on that basis. There are many reasons for its impermissibility.

‘1. One of these is that the insurance business is based on interest. There is a huge difference between something having interest as its foundation and something that involves interest. According to the law of the land, no insurance company is allowed to operate in the country until it purchases securities worth 100,000 from the government. Hence this is not a question of involvement but a question of legal obligation.

‘2. Secondly, insurance is based on the theory of interest. According to the Islamic Shariah, the Islamic theory is that whoever gives a sum to another, it is either through a donation, a trust, a partnership or a loan. [Insurance payments] are not a donation. They are also not a trust because there cannot be any increase or decrease in a trust. They are not based on a partnership because the policy holders are neither responsible for the gains and losses of the company nor do they share any authority in its operation. We can only class it as a loan and it is in fact a loan. This is because insurance companies use these contributions as they wish with complete control over it and they do not hold the policyholders responsible in case of any losses associated with the insurance business. Hence, this is a loan. A loan which results in any profits due to an advance agreement is called interest according to the Islamic Shariah. Therefore, insurance is based on a theory and a principle of interest.

‘3. Thirdly, the principle of insurance nullifies all principles on which Islam aspires to build a society. By fully implementing [the principles of] insurance, the essence of mutual cooperation, empathy and brotherliness disappear from the world.” (Al Fazl, Qadian, 18 September 1934, p. 5)

“According to the laws of some countries, it is compulsory to have insurance. It is permissible to buy such an insurance policy.

“On 25 June 1942, someone asked Hazrat Musleh-e-Maudra the following question:

‘The Uttar Pradesh (UP) government has legislated that anyone with a car must insure it. Would such insurance be permissible?’

“Huzoorra replied:

‘It must be noted that this enforcement is not only from the UP government but the Punjab government has ordered it too. Since this insurance policy is bought in accordance with the law and the government has declared it as compulsory, it is permissible, not for one’s personal benefits but rather as obedience to the government.’ (Al Fazl, 4 November 1961, quote from 25 June 1942)

“Majlis-e-Ifta submitted a recommendation to Hazrat Khalifatul Masih IIIrh regarding insurance, which Huzoorrh approved on 23 June 1980 and said:

‘According to the edicts of the Promised Messiahas and Hazrat Khalifatul Masih IIra, until agreements are not free of interest and gambling, it is not permissible to buy any kind of insurance policy from insurance companies. These edicts are of a permanent nature and unchangeable. However, one may review from time to time as to what extent insurance companies have rid themselves of the elements of gambling and interest as a result of their changing rules and regulations.

‘Majlis-e-Ifta has taken a closer look at the current methods of insurance companies and has come to conclusion that although it was not possible for any company to fully steer clear of interest in their business dealings due to the global nature of the financial establishments, but now such agreements between companies and policyholders have become possible, which are free of the elements of interest and gambling. Hence, there is no harm in taking out an insurance with this condition that nobody should take any interest from the insurance company on the contributions that they have collected from the policyholder.’” (Register Faisalajaat Majlis-e-Ifta [unpublished], p. 60)

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