Permissibility of insurance contracts in the light of Shari`ah

Q: Modern insurance contracts imported from the west have become widespread in our countries. Many Muslims deal with them, many insurance companies and offices have been founded, and many Muslim merchants, factory owners, and businessmen have subscribed to them. They are a guarantee for their imported goods and compensate for any damaged or stolen goods or accidents that occur during construction operations to factories or (Part No. 15; Page No. 262) worker - whether destructions, losses, deaths or harm. Insurance may compensate for the losses arising from accidents, robbery, or damage that may happen to cars. It may compensate for the collapse of wells or mines. The insurer thus escapes financial responsibility. Also, through life insurance the insurer's heirs receive compensation in case of his death. There are many other fields of insurance that are classified, defined with specific conditions, and annual installments paid by the insurer to the company in defined amounts. Insurance companies organize insurance contracts pursuant to their own laws that are adopted and recognized by governments. We would like your answer to our question regarding the legality of insurance contracts in the light of Shari`ah (Islamic law) and to explain the ruling on working for such companies.

A: All types of insurance are Haram (prohibited). They involve Jahalah (sale with lack of knowledge), Gharar (fraudulent transaction where details about the sold item are unknown or uncertain) - both of them are not pardoned - gambling, unjustly taking people's money, and Riba (usury/interest). There are many legal proofs that all these transactions are forbidden. Allah (Exalted be He) says: And eat up not one another’s property unjustly (in any illegal way e.g. stealing, robbing, deceiving, etc.) And: Shaitân (Satan) wants only to excite enmity and hatred between you with intoxicants (alcoholic drinks) and gambling, and hinder you from the remembrance of Allâh and from As-Salât (the prayer). So, will you not then abstain? (Part No. 15; Page No. 263) Moreover, the Prophet (peace be upon him) forbade Gharar sale. It is not permissible to work for insurance companies because it involves helping them in sin. May Allah grant us success. May peace and blessings be upon our Prophet Muhammad, his family and Companions.