Is Health Insurance allowed in Islam?
There has been extensive research and discussion and modernization in Shariah by esteemed scholars. Mufti Taqi Usmani is one of the respected names in Islamic financing and banking. He has given a detailed ruling on insurance claims and their place in Shairah
I am copying his original ruling written for insurance claim involving third parties. This ruling is for motor vehicle insurance but it covers the gist of insurance per se
“Although all of the conventional schemes of insurance violate certain injunction of Shariah and are therefore not permissible. However, if a Muslim is obligated by the law to have an insurance cover, it is permissible for him to have insurance up to the minimum level required by law. Since the third party insurance is obligatory by the law in most of the countries this has been allowed by the Shariah scholars but if fully comprehensive insurance is cheaper than the third party insurance and it can fulfill the requirement of law and after that one does not need to enter into a third party insurance then it will be permissible to have fully comprehensive insurance to meet the requirement of law. But two points must be kept in mind in this respect: First, merely on the ground that the fully comprehensive insurance is cheaper, both kinds of insurance cannot be held simultaneously if the law does not require so. Second, in case the fully comprehensive insurance is undertaken to meet legal requirement and the insured person is offered a compensation only to the extent of the total premium he paid to that company so far (it may include the premium to the same company with regard to some other items also) and the rest of the compensation must be given in charity.
If the car of a person is destroyed by a wrongful act of another person the owner of the car is entitled to receive the full market value of the car and not only the original cost of the car, but this market price is the liability of the person whose wrongful act caused the accident. Therefore, it is advisable that the aggrieved person receives compensation from the owner of the car and not from the insurance company. But if it is not possible for some legal procedures in a country and the amount of compensation is paid by the insurance company directly to the aggrieved person and not to the insured person, the aggrieved person can also avail of this compensation.”
Justice Mufti Taqi Usmani
Having said that, health insurance is something that is required in many countries. It is either not possible to access health or very expensive to do so in those countries. Since life takes precedence in all matters under Islamic shariah, health insurance is permissible. Muslims MUST strive to educate themselves and work hard and develop a system of welfare where such insurance becomes pointless. But till that time, Muslims need to carry health insurance for their own well being and survival