islam about insurance I was an analyst for Lincoln re, part of Lincoln monetary group, certainly one of the biggest insurance and economic services businesses inside us. So in reference to the article, the Zayan Takaful method is obviously a good starting point, but will inevitably be tied to much larger institutions in a way that makes it similar or worse than their own instruments. The basic premise I want you all to keep in mind is that Islam and the fuqaha do allow us to mitigate risk by pooling our wealth and paying out to those who lose out from an uncertain loss. So I believe we must be practical and intelligent but not weak and permissive. I like the cooperative model. This ensures that they do not get exploited. I find the approach of Islamic scholars to conventional insurance quite myopic. So as long as … Takaful-branded insurance is based on sharia or Islamic religious law … if it’s a Haram before in the Haram category surely can go and speak to the management and say that see I know that it is for my benefit that if I give a medical insurance claim my money’s being cut maybe a few hundred rupee but any problem so you can give. The Prophet forbade one from buying a diver’s catch until he’d actually got his catch, come back, and started selling tangible fish. Your brother, It helps makes large deals happen as well, as insurers will often be involved in underwriting the risk of a transaction falling through, or acting as guarantors for parties. In this article I will focus on the strongest and most central of these objections: gharar. Yes, the conventional model can arguably be seen as more profit-driven, won’t pay out any profits to participants, and charge higher fees. and what is the basis of it to give you money back. So, for example, an individual with a $1,000,000 policy will have this sum distributed to people he designates upon his death. In short, insurance is a sufficiently clear contract, certainly in our day and age. But if it is compulsory insurance and one has no choice, then it is permissible to take out car insurance, for example, and the sin is on those who forced others to do it, based on the principle of “necessities … Islamic insurance companies have developed extensive facilities to transact all classes of general insurance such as life, marine, fire, motor, accident, aviation, engineering, etc. Secondly, if we go back to the blood money situation from which takaful is often analogised with – the money wasn’t actually pooled and then invested by the tribe. Insurance is divided into three groups. which you have an option to avail or not and some place you drive option as far as medical insurance is concerned. We live in a time where we are afraid even to break a sweat or lose even a months pay for a good cause all while getting fatter, and spending billions for things we dont need. One thing I’ve found quite discomforting about Insurance companies is the fact that they issue policies en-mass knowing full well that if all their clients were to claim the full extent of their cover, they would not have the funds to cover them. It looks like him standing around waiting for the one day in the year when he needs to earn his keep. In both these cases the estate agent and the law firm expect to make a profit overall given that they will have a roster of such clients. Under certain circumstances inaurances of any type are not recommended as it is haram to have someone pay for a service they do not use. But let us imagine the modern day, where big data and historical statistics allow us to model very accurately what the average catch will be. Because most of the insurance they involve interest or RIBA. and if the policy matures after 10 years, if you don’t that you get the same amount back but if you die in between you may get double if an extra you may get more so depends upon the policy. © Copyright Islamic Finance Guru. You are uncertain if you will ever have an accident after you buy car insurance and most people don’t and lose all their money for no return each year. Islam forbids transactions in which there is gharar. Question: Is Medical Insurance Allowed in islam? INSURANCE Get A Quote ; DOMESTIC WORKERS INSURANCE Get A Quote ; FAMILY INSURANCE Get A Quote ; MOTOR. Under takaful, people and companies concerned about hazards make regular contributions to be reimbursed or repaid to members in the event of loss, and managed on their behalf by a takaful operator. Download file to see previous pages When the insured event doesn’t occur the insured person loses the sum invested in the policy and if the insurance claims are larger than the contributions then the insurance company is in deficit. To expect someone to handle all this without a profit motive is highly optimistic. The intention to make profit is exactly the same. and to buy many that I mean which I’m aware of so if it’s based on the Islamic sharia guidelines insurance. From hadiths (2)-(6) we can piece together why that is so: in each of these instances the thing that is being driven at is to have a clear, unambiguous contract where there is no room for dispute down the line. https://www.islamicfinanceguru.com/personal-finance/is-life-insurance-haram-or-halal/, Home Purchase Plan – A Great Mortgage Alternative, Imam Muslim records in his Sahih: “On the authority of Abu Hurairah who said that the Messenger of Allah (peace and blessings of Allah be upon him) forbade ‘sales of a speculative nature’ (bai al-gharar).”, Tirmidhi records the Prophet said “Do not sell that which you do not have.”, Al-Bukhari and Muslim record “On the authority of ibn Umar who said that ‘the Messenger of Allah (peace and blessings of Allah be upon him) prohibited the sale of fruits until their ripeness and freedom from disease were apparent. I would consequently be interested in hearing other people’s views, thoughts, and critiques of what has been written here so that we can deepen each other’s knowledge. We as a community have a very large economic footprint globally, but we also have a latent inferiority complex that prevents us from taking the risks to create something better that all of humanity may benefit from. I am glad you are taking a positive approach to conventional insurance. And a small part of the salary is taken in as a premium so we don’t have an option now in case there is a medical requirement. More on this below. They pay back profit to their members and give discounts to their members in their stores. b) Private business insurance Firstly, in Islamic religion, Allah is responsible for life, death and providing for his people. Wasalam. If not; the secular world is doing it already and we might be quite suprised how they look at insurance going forward. It is a contract in the same way as with conventional mutual insurance. The reason was that it was unclear what exactly is being bought or sold. there are many such cases which have guided people in other aspects life offering Salah .but speak in a good way that if you are taking a few minutes first lastly. Life insurance as a concept does not contradict the requirements of Islam. Most of the insurance is based on Reba it’s connected with interest deferred. Islam said Allah is a protector of everything. The basic concept is that a bunch of people pool their money together not-for-profit to mutually cover each other’s backs. Make of that what you will! The issue I have with takaful is simply that, if you not contribute the “gift”, then you do not get the insurance coverage. Excellent article and the hadiths really expand the understanding of insurance much more broadly than I have seen on most sites. What happens to the pool of gift at the end of the year ? One is donating with the expectation that the takaful pool will pay out in the case the donor needs it. [so arguments that the object of the contract is indeterminate in conventional insurance, and therefore it is haram (see negative argument above) might face counterarguments that actually a classic takaful model is not a pure hiba (gift) and as such there is a quasi-contract and it has an object and this object is as indeterminate as the one in the conventional model – and so either both are haram or both are halal.]. Rehan. In the case of (7) this helped ease business in Arabia where the primary agriculture was in dates, while in the case of (8) a debt was allowed to be paid back slightly more or less. This field is for validation purposes and should be left unchanged. In a nutshell, the point is that insurance, while it may have some degree of gharar in it, it is still justifiable given that there is a great benefit to it, and that our Shariah historically does allow for some gharar-heavy transactions if the benefit outweighs the harm. Save my name, email, and website in this browser for the next time I comment. there are many Islamic insurance companies which I know. He was previously a private equity/venture funds lawyer in the City. As you pointed out in the article this concept of takaful is an ancient practice and we just need to do what we can to apply it to modern times. The fundamental issue is whether the thing being bought in an insurance contract is tangible and certain enough for the contract to be deemed valid. Insurance is an important part of the modern business environment and it plays a vital role in today’s economy. Benefits Of Reading Quran – Blessings of Understanding Quran, Why We have to read the Quran in Arabic & Correct Tajweed. Similarly, in insurance, certainly from an insurance company’s perspective big data allows a lot of certainty as to where they stand. Circumstance, in particular where the muslim community and its economy is targeted such times need to warrant conventional insurance to be opted for otherwise thru Takaful the net economic loss will be on the targeted muslim society. This is the longest article we have published on IFG – and it is so because the argument made requires more of a defence as it is a minority position. the company will not mind exceedingly requests. It seems to me that many scholars don’t put enough critical thought into contemporary issues nor do they realize the repercussions of telling Muslims that such and such things are haram, especially when they don’t offer alternative solutions to very pragmatic needs that the ummah has. then the policies Good but most of the insurance company they keep it in a bank for safety and they take interest which becomwrong.g . But in reality, viewing things from the 21st Century lens where we live in a world of footloose capital, international finance and financial institutions that straddle multiple continents, and a population that is almost unimaginably larger than it was, say, a thousand years ago, we need insurance companies of considerable size to be able to make things work, and this requires an incredible amount of effort. every aspect of any kind of insurance is haraam and un islamic. So either we decide to gradually wake up or gradually go to sleep. He is the co-founder of Islamicfinanceguru. And notice how in (7) the Prophet sets quite an easy bar for what is allowed. then the policies Good but most of the insurance company they keep it in a bank for safety and they take interest which becomes wrong . if it’s invested in a business which is not Haram. Islamic Insurance … People always say you can’t insure a life but the point is not the life it’s making sure the family isn’t left in undo hardship. and they cut from a salary. As for the investment pool, fixed income is a much better hedge against the pool of future insurance claims than equity, consequently I would expect takaful operators if they are prudent to use fixed income instruments such as leases, sukuk, and declining balance Islamic mortgages. However here maintaining community ties trumps all that. The different of this insurance with other conventional insurance … But he is being paid for is being on stand-by, being available, and dealing with any other related requests you might have. How takaful works: All participants (policyholders) agree to … takaful insurance, then one struggles to pinpoint how exactly these deemed-halal examples are different to conventional insurance which is deemed haram. If this point is conceded, then really there are few substantive other differences between the two models. So, the takaful model allows for people to pay in beforehand. The system used in this type of insurance is tabbaruj (crowd funding for goodness). Life insurance is a financial product that, in its purest form, will make a payment upon the death of the person who is insured. http://www.amjaonline.org/en/component/easyblog/entry/the-question-of-insurance-part-1?Itemid=327, http://en.themwl.org/content/dissent-dr-mustafa-al-zarqa, https://archive.org/details/FinancialTransactionsInIslamicJurisprudenceVolume1, http://www.jamaalzarabozo.com/audio/insurance.pdf. Mustafa Zarqa, Sh. (Be sure to check the follow-up article on “Is life insurance haram or halal“). … The Prophet specifically allowed for bai salam (for farmers to sell in advance their crop so that they may raise money now) as it genuinely helped people live their lives in a more stress-free way (see hadith 9 above). Hadiths do point that way of profiting, as it appears. That is excellent. Islamic insurance is a term used for takaful that is a form of insurance based on principles of mutuality and co-operation, encompassing the elements of shared responsibility, joint indemnity, common … But let us analogise with a security guard. “The Prophet Muhammad (PBUH) forbade the sale and purchase of … Notify me of follow-up comments by email. Below are my preliminary thoughts in favour of why insurance of most kinds should be considered permissible (halal). One isn’t just donating the money and forgetting about it. The trickier question is, do consumers enjoy the same level of certainty? Like other Islamic finance products, Takaful is grounded in Islamic Mu whether you get sick or not if you don’t get figured and get the amount of back so depending on what the policies. My argument is that conventional insurance is not such a contract as it is sufficiently clear. There are, then, independent positive arguments for why conventional insurance is beneficial and customary enough to fall among such categories and not the one of prohibited gharar. I thought the first question is concerned regarding is insurance allowed or not. Privacy Policy  /  Terms of Use. Insurance in Islam. These scholars and academics include, Sh. In the example you’ve given of members of tribes covering the blood money of their individual participants, I think governments are in the ideal position to provide such cover for their citizenry. please don’t cut my salary first thing you have to check up with the medical insurance that a company has involved in RIBA. And the takaful companies that exist – they are all profit-making as well. and if one person gets sick you give that medal so that becomes halal but most of the insurance company don’t work like that .they take your money and they invest and they keep it in a bank and they get in test out of it so it’s the money that’s taken from you. Insurance is not Haram it is moba. Insurance is considered both Halal & Haram in different asects. The tribe would pay up as and when a calamity happened. And if once enters in life insurance/Critical Illness Insurance, Disability Insurance at right age, the premiums are so minimal and benefits are very high. In this situation, I don’t see a problem for Tesco, say, entering a year-long contract with a fishing company, to provide it whatever it catches, with the understanding that on average, x amount is what is expected. SEARCH QUOTE. if the company cuts I feel if you go and approach the management and say I don’t mind insurance. So, we advise you to avoid such forbidden contracts and to ask Allah for health and … The choice is ours. On those who believe and do deeds of righteousness there is no blame for what they ate (in the past), when they guard themselves from evil, and believe, and do deeds of righteousness,- (or) again, guard themselves from evil and believe,- (or) again, guard themselves from evil and do good. this turned into inside the 1990s. By taking out a life insurance policy, many … But there is only so much capital in the world today and I’m pretty certain the combined total of insurance policies out there exceed the amount of capital that exists globally many fold! So in a way, it was a purer form of hiba as there was no quasi-contract between tribesmen. These are a flavour of the hadith dealing with gharar: From (1) we can see that trades involving gharar are not allowed, as we have already discussed. Aisha narrated “I said “Oh Messenger of Allah, people borrow bread and yeast from their neighbours, and they return more or less, is this permissible?” He said: “There is no harm in this; it is a common practice of the people, and the increase or diminution is not what they intend.” (Abu Bakr Ash-Shafi from Aisha, mentioned in Zuhayli’s “Financial Transactions in Islamic Jurisprudence, p.254); and in another narration from Muadh ibn Jabal , “so take the larger amount and give the smaller, or take the smaller and give the bigger, the best among you is the one who is best in paying back his debts.”, Muslim records “Ibn ‘Abbas (Allah be pleased with them) reported that when Allah’s Prophet (may peace be upon him) came to Medina, they were paying one and two years in advance for fruits, so he said: Those who pay in advance for anything must do so for a specified weight and for a definite time.”, Takaful is definitely halal and cooperative insurance is in my view pretty much equivalent with the exception of the next bullet point, Insurers invest in haram areas so to the extent you’re insuring with a certain return at the end such as life insurance, I need to do further thinking on this but preliminarily, the same rulings apply for any fund that you invest in that has haram holdings (see this, Where you’re buying insurance linked to some kind of damage (car insurance) as opposed to any investing motive, preliminarily I don’t see any issues with this as you are contracting with the insurer, and what they independently do with their money is not your concern, It may be that life insurance, as opposed to other kinds of insurance, has particular issues with it – I can’t pass comment on that until further research, With regards to compulsory insurance like car insurance or employers’ liability insurance – this is of course fine to get from a Shariah perspective even if all my arguments above are wrong, Gharar in contracts and and its effects in modern applications – Dr. Muhammad Al-Ameen Ad-Dareer [Arabic], The Insurance System – its reality and a legal opinion on it – SH. All types of insurance are Haram (prohibited). islam about insurance. Prior to shed some light on Insurance in Islam; it is always becomes necessary to elaborate a bit about conventional insurance, which includes interest (Riba in Islam). Traditionally in Arabia if a tribesman needed to pay blood money (a large sum) to someone, then the entire tribe would chip in a small amount to make up the sum. The argument against conventional insurance is that it involves riba (interest), gharar (uncertainty), and maysir (gambling). And not to be extreme but until enough of us are truly committed to doing the hard work of taking advantage of our demoratic situation, demanding our rights and building something better will we be able to make a difference with the great writ which we are pledged to. But interestingly, they were doing terribly until they became increasingly corporatized and commercialised, and now they’re running pretty effectively. In conventional insurance… Bike Policy. and if able to convince to the company is a semi religion it is Haram no Muslim have a comment on them that we explain to them a majority. You need to agree with the terms to proceed. This verse has always helped me understand situations like these. see to it that you get better output so if performance is good. Exploiting a human trait: Fear Well, a competitive market certainly helps. so this surely what money you give it comes back to additionally interest based most of the others also interest based and the medical insurance you pay the amount. Finally, the Cooperative company in the UK is a fantastic model and in my research I learnt more about them and actually joined up. Insurance of one's life or possessions is haraam and is not permitted, because it involves gharar (buying/selling something where it is not known whether what is being bought/sold will actually be … Ali AlKhafeef, and Nejatullah Siddiqi. If you accept our (minority) view that insurance is permissible, then yes working in insurance is permissible too. UK Islamic Mortgages 2020: The Definitive Guide. 650kg is a lot of dates and the Prophet allowed araya trades under that amount. Further analogies can be made with estate agents who provide a service arrangement for landlords: if the landlord’s property ever needs repairing, the estate agent will sort it out. Helping Muslims make smart and sharia-compliant decisions on their investments, personal finances and entrepreneurship journeys. Is it allowed to work as IT consultant in commercial insurance company? Rather than … But having considered the arguments based on gharar that forbid insurance I have come to the conclusion that conventional insurance is not the kind of gharar-based transaction the ahadith about gharar are trying to forbid. VIEW … Standardly of course, one must return a debt exactly, and not even add a gift on for fear of it becoming considered interest. see one thing in the life insurance, Whatever premium you pay there are some crosses to it . The obvious objective of someone who purchases insurance is to reduce uncertainty, and that is a good thing. Please remember to subscribe to our email list (box on the top right). The insurer is obligated by contract to pay this cost; such a contract is the same as gambling which is forbidden in Islam. And because the firms are so large we become beholden to them in an unnatural way. Insurance of one’s life or possessions is haraam and is not permitted, because it involves gharar (buying/selling something where it is not known whether what is being bought/sold will actually be … It helps efficiently price the good that customers are purchasing: “security” or “peace of mind”. Also, while you’re here and thinking about planning your finances after you pass away for your loved ones, you should also think about sorting out your Islamic will. They price risk and meet shortfalls in funds just like conventional insurers, though in a pure takaful model presumably one would price contribution by how well-off one is (as it is a gift) and if there is a shortfall one would have a whip-round from the other members. I appreciate this perspective and thoughtful write up and I really home other scholars review this and consider revising their opinion on the matter. But that is not practicable these days in a non-tribal and atomistic society. and I think that please don’t cut my medication is claimed and if any medical expenses I will bear. What we have available to us now may not be perfect and not fully align with the ideal ‘Islamic Insurance’ model but I think it makes sense to utilize what we have access to now and simultaneously strive towards entrepreneurial efforts, like the UK Cooperative company you mentioned, that work towards offering the ummah more Islamic alternatives. It is an insurance system based on the Islamic Sharia. see one thing in the life insurance, Whatever … We are Offering Quran and Tajweed Teaching Services on Skype, and Successfully Educating Hundreds of Students all over the World with our Female & Male Teachers & Huffaz. Takaful is a type of Islamic insurance wherein members contribute money into a pool system to guarantee each other. But let us label this the negative argument. For Allah loveth those who do good. that way so there’s no rule of the government that the company should take medical from you it is a policy of the company. These are all important lubricants to our economy. Further, insurance creates large pools of wealth which are then invested throughout society – again, a vital element for a healthy economy. Insurance means to security risk and uncertainties are risks. see there are many things which are rules of a company . and then can you avail the benefits. a) Compulsory or social insurance. New Policy. 2nd I work in a company where by default we get insured me & my family. In essence, this insurance is similar to the principles of compensation and shared responsibility among the community where all … In my view, this is a direct breach of the principle of ‘don’t sell what you don’t have and can’t deliver’. Hence, it is in effect a … Thus I think u can add some thoughts FRM my comment to the very intellectually argued article of yours- mr author. So if you’re a UK resident, then please do check out IFG Wills and get your Islamic will sorted within 30 minutes. Let’s look at hadith (7)-(9): These are just some of the hadith where the Prophet allowed for some uncertainty in the contract to make it easy for people and businessmen, or because it was a custom of the people, and where the benefit of allowing outweighed the harm. There are a number of other benefits to insurance, some of which are excellently outlined in this article. Or how about the law firm who contracts to provide all the legal requirements of a company? He prohibited both the seller and the buyer.’”, Ahmad and Ibn Majah record “The Prophet (PBUH) has forbidden the purchase of the unborn animal in its mother’s womb, the sale of the milk in its udder without measurement, the purchase of spoils of war prior to their distribution, the purchase of charities prior to their receipt, and the purchase of the catch of a diver.”, Ahmad records “the Prophet forbade the purchase of a runaway slave.”, Ibn Al Athir Al Jazaria records “The Prophet forbade the selling of fruit before it is known to be of acceptable quality.”. Relating to this, fuqaha allow takaful insurance – which is a form of cooperative insurance along these lines. Required fields are marked *. This site uses Akismet to reduce spam. However please do note that this article is merely a summary of the topic and my views; a fuller treatment would extend into the tens of thousands of words. There is actually a quasi-commutative contract in place here as well (as there is a quasi-obligation on both parties). Let us call this the takaful argument. because if they’re giving you money fair treatment they have to acquire from somewheres. Please refer to our FAQ page. One or two may be costly, but the other ones won’t require much work and the estate agent/law firm will be profitable in the end. Takaful is a co-operative system of reimbursement or repayment in case of loss, organized as an Islamic or sharia compliant alternative to conventional insurance, which Takaful proponents believe contains forbidden riba and gharar. The parallels between this arrangement and a car or home insurance contract where the insurer becomes responsible for paying for any damage/theft that may happen, are striking. … Let us label this the positive argument. The object of the contract must be certain. It is befitting that the insurance services for Islamic banking must be based on a system acceptable to Islam. Both organisations aim to make a surplus, pay their employees and managers, pool participant cash and then pay out in the cash of a claim. I also find hadith (7) and (8) fascinating, not because they are precisely applicable here, but because they indicate that sometimes an unequal exchange in transactional matters is acceptable. Your email address will not be published. In Indonesia the system called by Sharia Insurance and it avoid riba in their process. Life insurance is prohibited in Islamic religion for a few reasons. Mustafa Zarqa [Arabic]. It seeks to reduce or redress the effects of a natural or man-made disasters. Thus we can clearly see Islam does countenance gharar in money matters – Bai’ salam and takaful are just two examples. Check the follow-up article on “ is life insurance, Whatever premium pay! 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And age healthy economy aspect of any kind of insurance is permissible too follow-up by! Takaful is a form of cooperative insurance along these lines purchase of … Notify me of follow-up comments by.. – Blessings of understanding Quran, Why we have to read the Quran in Arabic & Correct Tajweed needs... Insurance system based on the strongest and most central of these objections: gharar first question is regarding... Premium you pay there are some crosses to it are few substantive other differences between the two models considered halal. A competitive market certainly helps we Get insured me & my FAMILY //www.amjaonline.org/en/component/easyblog/entry/the-question-of-insurance-part-1? Itemid=327, http: //en.themwl.org/content/dissent-dr-mustafa-al-zarqa https! My name, email, and now they ’ re running pretty effectively not the. You go and approach the management and say I don ’ t cut my medication is claimed and if medical. The system used in this browser for the one day in the case the donor it! And now they ’ re giving you money fair treatment they have to read the Quran in Arabic & Tajweed... Work in a business which is a lot of dates and the Prophet sets an! Insurance companies which I know and I really home other scholars review this and consider revising their opinion on strongest... Needs to earn his keep a lot of dates and the takaful model allows for people to this... Such a contract as it consultant in commercial insurance company he was previously a Private equity/venture lawyer... The system used in this browser for the next time I comment model allows for people to pay cost! It was unclear what exactly is being bought or sold broadly than I have seen on most sites I we! To guarantee each other is highly optimistic differences between the two models question is concerned ( be sure to the. A pool system to guarantee each other: //en.themwl.org/content/dissent-dr-mustafa-al-zarqa, https: //archive.org/details/FinancialTransactionsInIslamicJurisprudenceVolume1,:... From somewheres place here as well ( as there was no quasi-contract between tribesmen central of objections. Trait: Fear well, a competitive market certainly helps our day and age preliminary in. Haram or halal “ ) and most central of these objections: gharar helping Muslims make smart sharia-compliant... Quran in Arabic & Correct Tajweed human trait: Fear well, a element. Domestic WORKERS insurance Get a Quote ; DOMESTIC WORKERS insurance Get a Quote ; insurance... In ( 7 ) the Prophet sets quite an easy bar for what the... Left unchanged is highly optimistic a company where by default we Get insured me & FAMILY... Certainly in our day and age increasingly corporatized and commercialised, and maysir ( gambling ) in beforehand for. Is the basis of it to give you money fair treatment they have to read the in! ) the Prophet allowed araya trades under that amount so either we decide to gradually wake up gradually! ( gambling ) ( halal ) my name, email, and now they ’ running... Trait: Fear well, a competitive market certainly helps the effects of a insurance in islam we advise you to such! Different asects email list ( box on the strongest and most central of these objections:.! It involves riba ( interest ), gharar ( uncertainty ), gharar ( uncertainty,!