Question : What is the ruling regarding [the validity of] business insurance?

Fatwa in Brief: It is not permitted because it is a form of gambling and is harmful.

Shaykh Ibn Jebrin, Al-Lu’Lu’ Al-Makin, pp. 190-1

Shaykh Yassir Birhami, www.alsalafway.com

Response:

Contemporary scholars differ as regards the question of taking out insurance, in today’s understanding of the term. Some situations now make it necessary for people to own some types of insurance so as to prevent harm and hardship.

Commentary:

Insurance is a system of convenient and shared responsibility; and it alleviates [potential distress]. According to this understanding of its function, insurance fits well within the foundational framework of Islam, providing that it is implemented according to Muslim law. There are various systems of insurance; within each there are different types. Hence, it is now possible to take out business insurance, social insurance, and mutual insurance. Each type carries its own policies.

Social insurance implies that no profit is made. Rather, it safeguards the individuals [i.e. the insurance holders] and their wider society. According to the law, it is permitted for a worker to contribute some of his/her salary during the period he is working [towards this purpose]. In so doing, s/he will benefit from this [kind of] insurance [policy]. This insurance coverage begins when s/he starts to work, and thus it resembles Islamic or Mutual Insurance.

And God knows best.

Business insurance, however, is a more controversial subject. The majority of contemporary scholars believe that business insurance is forbidden to Muslim (haram); so too [for the same reasons] are “life” and “building” insurance policies. To insure these things from damage and destruction it is necessary that a certain amount should be paid to an insurance company over a specific period of time. In return, the company will pay the costs of any potential damage or destruction [were this to happen]. These types of insurance are not permitted according to Islamic law on the grounds that they are predicated on something that may, or may not happeu. In this sense, they resemble gambling. And this is the reason for their prohibition.[1]

[In contrast to this] Some contemporary scholars are of the opinion that this form of insurance is permitted. Among these scholars are included Shaykh ‘Ali al-Khafif, Muhammad Musa, ‘Abd al-Wahab Khalaf, Mustafa al-Zarqa, and the [current] Mufti of Egypt, ‘Ali Jum‘a.

[In our view] The best approach to this subject is to be cautious and to follow the opinion of the majority [and thus not to take out business insurance]. However [as stated above], in these days [where trust is hard to find], there is often a need for some types of insurance, so as to prevent harm and hardship. [In the world of business] A person may fear that s/he will lose his money. This is especially the case if [the source of] his/her capital includes money that belongs to different people. As we know, in times of necessity a prohibited thing becomes permissible. Thus, Muslims may need to deal with [and thus to use] insurance companies from the perspective of necessity or of dire need; and the [potential] danger s/he faces [in the workplace] may be solved by the [otherwise forbidden] system of business insurance.

And God knows best.

Dr. Anas Abu Shadi