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Fatwa CenterRuling on insurance
Question
What's Islam opinion about insurance? (all kinds)
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.
As far as we know, insurance is a new issue which was not known to the former jurists 
. It appeared in Muslim societies due to the absence of an Islamic state. Anyway, the Islamic legislation does not approve of it and all its forms are forbidden, whether it is life insurance, health insurance or insurance on goods or properties, and so forth; because it includes forbidden contracts. For instance it involves Ribaa (interest and/or usury) because one party of the contract gets more than what it had paid. A shop holder, for example, pays one thousand and when he is faced with any problem, he gets ten thousands. This insurance is also based on high risk. A person may pay some money and he may lose that amount without any recompense, or he may experience a great damage and the other party will compensate him with a much greater amount than what it had received from him. This is nothing but a high risk. Insurance also includes gambling, as clarified in the above example.
Insurance involves as well paying an amount of money in return for a guaranty, because one pays an amount of money so that the other party will guaranty –whatever it is- for him. Therefore, there should be no difference of opinion about the prohibition of insurance unless a person is obliged to do it, for instance if one is in a country where car insurance is compulsory. In this case, in our view [Islamweb], if one causes damage to another, then one may refer him to his insurance company if the damage is equal or less that what he had paid the company. However, if the damage is more than what he had paid the company, then one should only let the other claim according to the amount he had paid the company and then one should pay him the remaining from his own pocket, because it is an invalid contract. And the rule, in this case, is that one should not take more than his capital money. Allaah Says (what means): {…but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).}[Quran 2:279]. This means that one should not be unjust to others by taking more money than what he had paid them, and on the other hand the other party should not be unjust to him by taking from him all his capital money or part of it without any right.
The same thing applies when damage is caused to you, if what you had paid and what the other party who caused damage to you had paid is equal to the amount of repairs, then you may take all this money, but if the amount is less than the amount of repairs, then, if it is possible for you to convince him to pay you the difference because he is faulty, then all the best, otherwise no.
Of course, all the above applies to a non-cooperative insurance; however, if the insurance is cooperative, for instance if a group of people agree-each one of them- to pay an amount as a donation, and this amount is reserved for emergencies which may happen to each one of them, then this is permissible, Allaah willing, as long as the donator gives this amount with the intention of donating, and as long as there is a need for such amount.
Allaah knows best.
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