Ruling on car insurance

26 Feb 2018 Ref-No#: 253

Assalamu alaykum,

Is car insurance permissible? If not, will it be permissible to learn how to drive using a car that is insured?

Answer

All forms of voluntary insurance, be it life insurance or short term insurance of motor vehicles, properties, businesses, houses or other assets are not permissible in Islam. The Shari’ viewpoint is this that there are two Haraam ingredients involved in insurance schemes, one being Qimaar (gambling) and the other, Riba (interest).

Hazrat Mufti Taqi Uthmani (may Allah bless him with a long life) has mentioned it in the following words in the book CONTEMPORARY FATAAWA :

“It is a well settled principle of Shari’ah that every transaction between two parties in which the payment by one party to the other is certain while payment by the other party depends upon a contingency (which may or may not occur) is included in Qimaar and Gharar and is, therefore, unlawful.

The insurance of cars or other goods with the traditional Insurance Companies is a commercial transaction in which the person who wants to insure his goods is bound to pay a premium to the company in accordance with the prescribed conditions. This payment is certain and mandatory without which an insurance is not possible. But on the other hand, the payment by the company is not certain. It is a contingency upon an event or accident which may or may not occur. If the accident takes place, the company is bound to pay an amount far more higher than the amount of the premium paid by the insured, but if the accident does not take place, the company does not pay to him anything and the premium paid by him goes without any return. In other words, the insured is bound to pay in any case while the company may or may not pay. Such kind of transactions is termed as Gharar and Qimar and is strictly prohibited in Sharî’ah .

Moreover, if the accident takes place, the amount of insurance is paid to the insured as a consideration of the amount of premium. It is again repugnant to the well-settled principle of Sharî’ah that where money is exchanged for money, both the amounts should be equal in quantity. Any increase on either side is ‘riba’ which is clearly prohibited by the Holy Qur`ân and Sunnah.”

Yes, if motor car insurance is compulsory in any country, then in the event of an accident, the client can only claim for damages according to the premiums paid. Any increase will be interest.

It will be permissible to use a car which is insured, since the transaction is between the owner and insurance company.

نهي النبي – صلى الله عليه وسلم – عن بيع الغرر» والغرر ما يكون مستور العاقبة (المبسوط للسرخسي (13/ 68)

وقوله: والفضل ربا، يحتمل الفضل في القدر، ويحتمل الفضل في الحال، بأن يكون أحدهما نقدا والآخر نسيئة. وكل واحد منهما مراد باللفظ وقوله: ربا أي حرام، أي: فضل خال عن العوض والمقابلة إما متيقنا به عند فضل القدر أو موهوم الوجود عادة لتفاوت بين النقدين والنسبة في المالية. (المبسوط للسرخسي (12/ 111)

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