Is Insurance Haram?

Salaam alykum,

This is an issue that is discussed in very odd terms, because if you Google this, and go to Islam Q&A, they will say “that the majority of the scholars” declare it to be haram.

Er.

But, before I get to that, can I just say, if you live in America, isn’t it crazy how many car insurance commercials there are? Just me?

Anyways, back to the whole “majority of the scholars” business. That statement by Islam Q&A is factually incorrect. I say this not to slander or insult the opinion at Islam Q&A, I say this, literally, from a place of accounting.

For some reason, Muslims have taken this idea that “insurance is haram,” and to be quite frank, the idea that insurance is akin to usury (riba’) or other financial transactions is curious to say the least.

Let us establish something quite firmly: “insurance in its various forms is a novel transaction and there is no textual evidence in Islamic law about its permissibility or prohibition  Therefore, insurance falls under the ijtihad (speculation) of scholars and their research deduced from the general implications of various evidences in primary texts.“

That is the Grand Mufti of Egypt, Dr. Ali Gomaa, when writing on this very subject. He is a Shafi’i scholar, and he is widely known as one of the premiere scholars of Shariah in the world today. He heads Dar al-Ifta, the institution in Egypt which issues Fatawa (Legal Opinions, plural of Fatwa) and the decisions from there reflect not just Dr. Gomaa’s opinions, but that of the council, as well as the ijma (consensus) of the graduates from Al-Azhar, which is the most important Islamic University in Sunni Islam, and whose Grand Sheikh (Sheikh Al-Azhar) is the actual highest ranking scholar in Sunni Islam.

Why did I get into all that? Because, if you’re going to discuss “the majority of the scholars” you kinda, sorta hafta include those guys.

The Grand Mufti opens his Fatwa by citing first The Qur’an and then the Hadith:

“And cooperate in righteousness and piety and do not cooperate in sin and aggression. And fear Allah; indeed, Allah is severe in punishment.” [Qur’an. 5:2]

And the words of the Prophet [pbuh]: ‘The examples of believers in their love, sympathy and compassion for one another is similar to the example of a single body; when one of its organs complains, the other organs respond with sleeplessness and fever’ [Al-Bukhari.]“

The Grand Mufti goes on to explicate a rather elegant answer, underlining the different types of insurance, which, mind you, includes Social Security, which through the disbursement of pensions and stipends in Saudi Arabia, means that insurance is paid and used, and is part-and-parcel of the institutions and scholars cited by Islam Q&A. However, this is considered to be “mutual insurance” and “social security,” which, in my mind, is simply the public handling of insurance.

Grand Mufti Gomaa underlined that in the realm of commercial insurance that there “is fierce contention among scholars concerning commercial insurance which includes Personal insurance. A group of scholars content that this type of insurance is unlawful because it includes elements of risk which is prohibited in Islamic law, gambling, betting and interest. Others maintain that it is permissible and does not contradict the principles of Islamic law, since it is based on social welfare and cooperation in righteous and piety and because it is a form of donations and not compensations.”

The Grand Mufti notes that insurance is a contract, and if we are to use The Qur’an, then we must address contracts as such: “O ye who believe, fulfill [all] contracts.” [5:1]

Therefore, when opponents to insurance utilize the Hadith where Umar ibn Yathribi said: “I witnesses a sermon by the Prophet [pbuh], which he gave at Mina, in which he said: ‘A person’s property is unlawful upon his brother save what he gives willingly” they are (according to the Grand Mufti) misusing the Hadith.

Dr. Gomaa writes: “The Prophet’s [phuh] directive in this respect is freedom of will. In insurance contracts, both parties, the insurer and the insured, agree upon taking property in a certain way, making this contract lawful.”

Affirming his point, Dr. Gomaa writes “scholars cite common practice among the basis of permissibility, since customs are among the sources of legislation in Islamic law. Likewise, they urge the permissibility of insurance due to maslahah mursalah [general public interest] And, since they share many similarities, commercial insurance should take the same ruling as mutual insurance and social security both of which are sanctioned in Islamic law.”

He goes on, explaining in detail via the legal codes themselves, but concludes that “Insurance is a universal phenomenon and nations use it to advance and develop their countries. Islam did not close this door for its followers since it is a religion that upholds progress, civilization and organization. There are Muslim scholars, both past and present, who maintained the permissibility of insurance, substantiating their opinions with evidences some of which are mentioned above.”

Furthermore, in their ruling on the matter, Dar al-Ifta writes: “Dar al-Ifta al-Misriyyah is of the opinion that there is no legal objection to implementing the various types of insurance. We hope that, whenever possible, insurance extends to cover uninsured individuals and be made mandatory with monthly or yearly premiums of a reasonable amount. All of this is to help people become accustomed to save and give out to others on the basis that they will regain their money along with profits generated from its investment and which is ultimately useful to them and their countries. Advanced countries and societies are those which instill in their children the value of saving and work to benefit their religion, themselves and their future.”

Again, this is not my opinion, but the opinion of the Grand Mufti of Egypt and Dar al-Ifta. I find their Fatawa to be of highest quality and of greater authority than any other institution, and thus, in this instance, agree with their position. If you would like to read this particular Fatwa in its entirety you may do so here.

I hope this answered your question, insha Allah.

I pray this reaches you and your families in the best of health and Iman, insha Allah.