Bismillahir Rahmanir Raheem.
My dear brothers and sisters in Islam,
May Allah ﷻ grant us all understanding and guide us on the path of truth and sincerity. Today, I want to speak with you about a matter that touches nearly every one of us in modern life: insurance. You hear this word often — car insurance, life insurance, health insurance, property insurance — and many Muslims ask the important question: Is Insurance Halal or Haram in Islam?
Let us understand this step by step.
What is Insurance?
In simple terms, insurance is a contract between a person and a company (called the insurer). The person pays a regular amount of money (called a premium), and in return, the company promises to help if something bad happens — like a car accident, house fire, illness, or death.
The company collects money from many people and uses it to help those who experience a loss. On the surface, it looks like mutual help — a system of support.
But we must ask: What does Islam say about this system?
Is Insurance Halal or Haram in Islam?
There are different types of insurance, but the most common type (commercial insurance) has some serious problems from a Shariah perspective.
Let us look at three major reasons why classical scholars consider most forms of insurance to be haram:
1. Gharar (Uncertainty)
The contract of insurance involves a high level of uncertainty. You pay money regularly, but you don’t know if you will ever get anything in return. Or maybe you get much more than you paid. This kind of uncertainty in transactions is not allowed in Islam. The Prophet ﷺ forbade transactions involving gharar (uncertainty or ambiguity).
2. Maisir (Gambling)
Insurance is often compared to gambling. Why? Because you are betting money on the possibility of an event happening. If the event doesn’t happen, the company profits. If it does, you get a payout. This resembles maisir, which is gambling, and it is strictly prohibited in the Qur’an.
Allah ﷻ says in the Qur’an:
“O you who believe! Intoxicants, gambling, sacrificing to stones, and divination by arrows are an abomination — of Satan’s handiwork. So avoid them so that you may succeed.”
(Surah Al-Ma’idah, 5:90)
3. Riba (Interest)
Many insurance companies invest your premiums in interest-based transactions, or sometimes pay interest on delayed payments or funds. We all know that riba is haram, and the involvement of interest makes the insurance contract even more problematic.
Is There Any Permissible Form of Insurance?
Yes, some scholars have permitted a system called “Takaful”, which is a Shariah-compliant cooperative insurance. In this system:
- The members contribute to a shared fund,
- Losses are shared,
- The system avoids interest and gambling,
- And it operates as a mutual support system — like tabarru‘ (voluntary donation) — not a commercial transaction.
Many Hanafi scholars and fatwa councils have allowed Takaful as a halal alternative when structured correctly.
What If the Law Requires Insurance?
In many countries, including where we live, car insurance or health insurance is required by law. In such cases, many scholars — including Hanafi fuqaha — have given a concession (rukhsah) that it is allowed to take such insurance out of necessity (darurah), but one should not go beyond the minimum requirement.
The sin is not on the individual if there is no choice, but the system remains problematic.
Conclusion
My dear brothers and sisters,
- Commercial insurance in its typical form is not in line with Islamic principles due to gharar, riba, and maisir.
- Takaful, as a cooperative alternative, is permissible and encouraged where available.
- In cases of necessity, we may take the minimum required insurance under compulsion, without sin.
Let us always seek to protect our wealth and families in a way that also protects our deen. May Allah ﷻ grant us halal provisions and keep us away from doubtful matters.
Wa akhiru da’wana anil hamdulillahi Rabbil ‘alamin.
Wassalamu Alaikum wa Rahmatullahi wa Barakatuh.