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Insurance in Islam

.INSURANCE IN ISLAM.Insurance is a very essential aspect of modern business and the major concern of Islamic jurisprudence.   Except for the basic concept that is misunderstood by a good community of people insurance has countless benefits. Before taking into account the main topic let’s have up on the modern concept of insurance.  Insurance is the protection which an individual or an organization buys for contingent losses or risks. The company or organization that offers insurance is called an insurer, insurance company, insurance carrier or underwriter. Such companies make a contract with an insurance buyer which is called an insurance policy. It contains certain rules, conditions, and circumstances which buyer of the policy is called insured or as a policyholder, is compensated by the insurer.

Insurance in Islam

The basic concept of insurance

As mentioned earlier it is meant to protect property from uncertain risks. Simply it is a risk management contract, where insurer promises to compensate the insured in recovering his loss. This loss may be accidental or because of any natural disaster. Meanwhile, the policyholder has to pay a sum of money to the insurer for future coverage. The amount of money the buyer pays is called premium. This was something related to property, if we talk about life insurance, here premium is paid for a certain duration to get a back money in a bigger amount. However, the policyholder if dies during this period the defined bigger amount is given to his relatives without payment of further premium.  This makes insurance to be interest based policy. Up to now, insurance seems to be prohibited in Islam but there are several types and forms. Like

  • Accident health insurances which assist a policyholder when he is seriously ill or is an accident victim
  • Property and casualty insurances ensure the recovery of financial loss in any natural disaster

One more thing while one buys an insurance policy under the policy he allows insurance Float.  You probably have been wondering what insurance float is? Here is the answer. It is a permission that that policyholder gives to the insurer to invest his money. This is where these companies earn.

Insurance in Islam

 Insurance in the light of Islam

Insurance is a very essential aspect of modern business and the major concern of Islamic jurisprudence.  Except for the basic concept that is misunderstood by a good community of people insurance has countless benefits. One may take for an example if he owns a health insurance he will be peaceful that in case of any illness he will get medical assistance. Or if someone buys home insurance he will not be worried about being homeless even after his homes burn down.

When we particularly talk about Muslim Community there are several frequently asked questions regarding Insurance. Some of them are:

  • Is insurance permissible in Islam
  • To what extent one may participle in Insurance
  • What are the conditions on which insurance may be lawful
  • ETC

Along with these questions, there are some misunderstandings regarding insurance. Like a community of people believe that it is similar to Al-Aqilah. Al-Aqilah is the concept of payment of blood by a tribe bound guilty of murder to the murdered next of kin.  However, insurance is concerned with legal accountability. While some believe that buying insurance means lacking faith in Allah the Almighty. As Allah the Almighty Promises to provide food and we can seek refuge from him for certain risks why should we rely on insurance especially for future dangers?

However, these are the concepts people having less knowledge. Islam gives permission to build protection for uncertain consequences. It is proved through the Quran and Sunnah. In a Hadith narrated by Anas ibn Malik, who narrated once a Bedouin, riding camel came to Hazrat Muhammad (S.A.W) and asked: “Can I leave the camel alone and trust in Allah?” Hazrat Muhammad (S.A.W) replied, “Tie your camel first, then put your trust in Allah.”

Insurance in Islam

As far as we are concerned with insurance it is never even linked with reliance on Allah. It is mater of Islamic commercial Law how is it dealing with insurance.

Reason for the prohibition of commercial insurance in Islamic law:

It is proved through many Hadith Mubarak that Islam does not allow the sale of uncertainties. In other words, one cannot buy or sell some things whose worth is defined but quantity is not fixed. For example, I cannot sell any type of good whose amount is undefined while for the fixed price.

Like a Hadith by Abu Hurayrah clarifies; Hazrat Abu Hurayrah says that Hazrat Muhammad (SAW) prohibited business transactions determined by the throw of a stone and also the business transitions which involve uncertainties.

Meanwhile, the insurance itself is the sale of uncertainty. Insurance companies sell something that is not recognized as a selling product in Islamic commercial law. Moreover, Policyholder pays a premium for something that is yet to happen or may not happen at all. This is the biggest reason why insurance is prohibited in Islam.

 

 

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