Is Insurance Halal or Hara'am?

 

Insurance providing protection against financial losses or it provide a shelter against a possible eventuality. It is a form of risk management.There are many types of insurance like Health,auto, homeowners, and life are the most common types of insurance. 

Types of Insurance

Is Insurance halal or Hara'am? 

Whether insurance is hala or haram, It depends upon the specific insurance product being offered and the organization from it is being offered.Some peoples says Insurance is Halal and some says Haram. For this purpose let us take insurance, it means common types of insurance like car insurance, life insurance, health insurance, home insurance and business insurance etc. 

Gharar 

Islam does not allow the transactions that include gharar because is another form of uncertainty and in which we have no idea what will be the ultimate outcome and Muslims are supposed to engage in open and honest business transactions. It is easy to see how insurance constitutes uncertainty. 

 When you take out an insurance on a car, home or a business you are doing so because you are uncertain how future risk may effect these things or you are uncertain what will be the future outcome. Conventional insurance is gharar-based insurance there something which is being uncertain means it is bought in exchange for premium, so it is not allowed in Islam. 

Islamic Scholar Abd-al-Aziz ibn Baz said: “Do not sell that which you do not possess.” 

According to the Holy Prophet: 

“Abu Huraira narrated that the Holy Prophet forbade sales by the pebbles and gharar sales i.e. Indetermination and speculative transaction.” 

For Example you are uncertain if you will ever have a health problem after you buy a health insurance and most people don’t and lose all their money for no return of each year. 

Riba 

Islam does not allow the transaction that involve riba because riba is another form of interest and interest is not allow in Islam. 

•  Riba is an increase over principle amount stipulated in loan transaction, without any corresponding consideration. 

According to the Holy Prophet: 

“The Holy Prophet PBUH cursed one who charges riba gives it, records it, and witnesses it. They are all equal.” 

In Quran Allah Says: 

“And Allah has permitted sale and prohibited Riba or usury.” 

While riba is clearly forbidden in Islamic law but it is a different question about whether insurance does actually constitute interest. But to answer this question of Halal and haram we examine the other concepts involved in it. 

Maysir 

Maysir means game of chance. It is prohibited in Islamic law because  a person getting a profit without doing any effort or without doing any hard work. 

According to the Muslim scholar Faleel Jmaldeen: 

                     “Maysir as the acquisition of wealth by chance not by effort.” 

The Quran Says: 

              “O you who believe: Intoxication and gambling dedication of stones and divinations by arrows are an abomination of satans handiwork. Eschew such abomination, that you may prosper.”   

 Arguments 

On the Haram side modern insurance practices are Haram because it implies some form of riba, gharar and maysir. Therefore some financial institutions may offer insurance products that are haram, So Muslims should investigate of these kinds of products. 

On the Halal side, it is possible to argue that an individual paying for insurance is not involve riba, gharar and maysir because in purchasing insurance their intentions may be to provide security to their family members and they do not want to acquire wealth through their purchasing insurance. 

Conclusion 

So, the conclusion is  that in some aspects insurance is halal and in some aspects it is haram, So it is difficult to conclude it on one side because sometimes intentions may be different in purchasing of insurance and may be some financial institutions not charging riba in purchasing of insurance so, we can conclude it is halal or haram according to the types of insurance because some types according to the Islamic law is Halal and some are haram.