Friday, February 16, 2007

The prohibition of Insurance in Islam

The following is a translation of a section from the excellent book 'The Economic System of Islam' by Sheikh Taqi ud-deen an-Nabhani.

Insurance (Ta’meen)

Insurance whether on life, goods, property or any of its numerous types is a contract. It is a contract between the insurance company and the insuring person in which the latter asks the insurance company to give him a promise that it will compensate him for that (‘Ayn) which is spoilt or destroyed or for its price with regard to goods or property, or a certain sum of money with regard to life and the like. This takes place if the accident occurs within a defined period, in exchange for a certain amount of money (premium); and the (Insurance) company accepts this.
Based upon this offer and acceptance, the insurance company undertakes to compensate the insuring person, within certain conditions approved by the two sides, either for the thing which he loses or its price when an accident occurs, or a sum of money which they have agreed upon e.g. in the event of his goods being destroyed, his car being damaged, his house being burnt down, his property being stolen, him dying or the like occurred during a certain period of time, he will be compensated, in exchange for a certain amount of money (premium) which the insuring person pays to the company during that defined period of time.

It appears from the above that insurance is an agreement between the insurance company and the insuring person over the type of insurance and its conditions, so it is a contract. However, according to this contract which was concluded between the two sides . i.e. the agreement . the company gives an undertaking to compensate or to pay a certain amount of money within the agreed conditions. So if an accident occurred to the insuring person upon which the terms of the contract apply, then the company becomes obliged to compensate him for the destroyed thing or
its price according to the market price at the time of the accident. The company is free to pay the price or to compensate for the loss to the insuring person or to others. This compensation becomes a right due to the insuring person, in the company’s responsibility (Dhimma) once the matter mentioned in the contract has occurred, provided the insurance company is convinced that he deserves it or if the court gave such a verdict.

The term ‘insurance’ has been used in this matter. Insurance could be to the benefit of the insuring person, or to the benefit of others such as his children, wife, inheritors, or any other person or group (beneficiary) assigned by the insuring person. Calling this contract ‘life insurance’, or insurance on goods, the voice or any other asset is aimed to market this transaction to the people. Otherwise, the fact of the matter is that the insuring person does not insure his life. He, rather, insures that a certain sum of money will be paid to his children, wife or inheritors or to any other named beneficiary designated by him, when his death occurs. Similarly he does not insure his goods, car, property etc: rather, he insures so as to be compensated for the insured object or its price in case it is injured or damaged. So it is, in fact, a guarantee (Dhamaan), for him or others to obtain a certain sum of money or compensation if something occurred to him that took his life or damaged his property, and therefore it is not a guarantee for his life or his property. This is the reality of insurance. The accurate study of it shows it to be invalid (Batil) from two angles:

Firstly: It is a contract because it is an agreement between two parties, and it includes offer and acceptance, where the offer is from the insuring party and the acceptance is from the company. So in order that this contract be legitimately valid from the Shar’a (divine revelation) point of view, it must contain the Shar’a conditions of the contract. If it contains such conditions it becomes valid, otherwise not. From the Shar’a point of view, the contract should apply upon an object or a benefit. So if it did not apply upon either a thing or benefit it would be invalid, because it would not apply upon a matter that makes it a legitimate contract. This is so because the legitimate contract applies either to a thing in exchange for something else as is the case with selling, forward buying/advance sale (Salam), company and the like; or it applies upon a thing without an exchange like the gift; or it applies upon a benefit in exchange for compensation like leasing; or to a benefit without compensation like lending. Thus the legitimate contract must apply upon something.

The insurance is not a contract that applies upon an object or a benefit; rather it is a contract that applies upon a pledge i.e. guarantee (Dhamana). The pledge or the guarantee does not represent an object for it cannot be consumed nor its benefit be used; nor does it represent a benefit, because no benefit derives from that guarantee itself either by leasing or by lending. As for obtaining money based upon this guarantee, this is not considered its benefit; rather it is a result of a transaction. Therefore, the insurance contract is not considered to apply upon a thing or a benefit, and it does not include all of the conditions required by the Shar’a in a legitimate contract, so it is void.

Secondly: The company gives a pledge to the insuring person within certain conditions, so it is a form of guarantee (Dhamaan). Accordingly, the conditions required by Shar’a in relation to the guarantee have to be applied to the insurance contract so as to be considered a legitimate guarantee. If it contained these conditions it would be legitimate, otherwise not. Referring to the guarantee we find:

The guarantee is where the guarantor (Dhaamin) joins his responsibility (Dhimma) to the responsibility of the person guaranteed for (Madhmoon ‘Anhu) in committing oneself to a certain right (Haqq). So it must include joining one’s responsibility to another’s responsibility; also there must be a guarantor, a person guaranteed for and a person guaranteed (Madhmoon Lahu). So the guarantee is the mandatory commitment (Iltizam) of a right as one’s responsibility without compensation. A condition of the guarantee’s validity is that it should be with regard to a financial right which is already due (for repayment) or which will become due. So if the pledge was not in respect of a due right or a right that will become due, the guarantee is not valid. This is so because a guarantee is the joining of one’s responsibility to another’s responsibility in relation to its fulfilment, so if there is no right in the responsibility of the person guaranteed for, then there is no joining of responsibilities. This is quite clear in the due right.

As for the right which will become due later, as for example when a man says to a woman: ‘Marry this person and I guarantee your dowry’, the guarantor has joined his responsibility to the responsibility of the person guaranteed for such that the guarantor will be bound like the guaranteed for, and that which is proved in the responsibility of the guaranteed for is similarly proved in the guarantor’s responsibility. Whereas, if there is no right due upon anyone or a right that will become due later, then there is no meaning to the guarantee as there is no joining of responsibilities; such a guarantee therefore is not valid. Therefore, if the right was not due upon the neck of the person guaranteed for or it does not become due later, the guarantee is not valid. This is because it is a condition that the person guaranteed for has a guarantor for an object if it is damaged or destroyed, or he is responsible for a debt whether the matter is actual in the case where the right was due and proved to be his responsibility or he is potentially responsible in the case where the right will become due later. So, if the person guaranteed for was not responsible, whether immediately or potentially, the guarantee is invalid because whatever is not due upon the person guaranteed for is not due upon the guarantor. So, for example, in the case of a person who receives clothes from (e.g. cleaner), and somebody told another person: ‘Send your clothes to him and I will guarantee them.’ If the clothes were then damaged, would the guarantor be responsible for the price of the clothes on behalf of the person who received them? The answer is as follows: If the clothes were damaged without his (i.e. the cleaner’s) action or negligence, then the guarantor guarantees nothing because, in the first place, the person guaranteed for (the cleaner) bears no responsibility for the damage. Since the principal (Aseel) is not liable for the damage then, with greater reason, neither is the guarantor. Therefore, there should be a right due to the person guaranteed for from other people, or it will become due later, in order that the guarantee becomes valid. So establishing the right for the person guaranteed for, whether immediately or potentially, is a condition for the validity of the guarantee. However, it is not a condition that the person guaranteed for (Madhmoon ‘Anhu) nor the guaranteed person (Madhmoon Lahu) be named; thus the guarantee will be valid if these were unknown (i.e. not named). So if a person said to another: ‘Give your clothes to a cleaner,’ and the latter said: ‘I am afraid that he will damage them.’ Then the former responded: ‘Give your clothes to a cleaner and I guarantee them if they are damaged’ without specifying the cleaner, the guarantee is valid. So if he gave them to a cleaner and they were damaged, the guarantor would be responsible even if the person guaranteed for was not named. Similarly, if he said: ‘so and so is a good cleaner, and I guarantee him against any damage for any person who gives to him his clothes,’ the guarantee is valid though the guaranteed person is unknown.
It is clear in the evidence of the guarantee that there is a joining of one’s responsibility to another’s responsibility, and it is a guarantee of a right due upon the responsibility (Dhimma). It is also clear that there is a guarantor, a person guaranteed for and a guaranteed person. It is also clear that it is given without compensation, and that the person guaranteed for and the guaranteed person could be unknown. The evidence for that is what Abu Dawud narrated from Jabir who said: “The Prophet (saw) would not pray over any person who died while indebted. A dead man was brought. He (saw) said: ‘Is he indebted?’ They said: ‘Yes, two dinars.’ He (saw) said: ‘Pray for your companion.’ Abu Qatadah al-Ansari said: ‘O Messenger of Allah, they are upon me.’ The Messenger of Allah (saw) then prayed over him. When Allah (swt) opened the land (i.e. conquests in Jihad) for the Messenger of Allah (saw), he (saw) said: ‘I am more entitled to (i.e. responsible for) every believer than his own soul. So if anyone leaves a debt it is upon me to repay, and whoever leaves wealth it is for his inheritors.”’ It is clear in this Hadith that Abu Qatadah had joined his responsibility to the responsibility of the dead man in committing a financial right due upon the debtor. And it is clear in the Hadith that the guarantee includes a guarantor, a person guaranteed for and a guaranteed person; and the guarantee which each of them (the dead person and the guarantor) guaranteed to pay was a right due upon the responsibility (of the deceased) and it was given without compensation. It is also clear that the person guaranteed for i.e. the deceased and the guaranteed person i.e. the owner of the debt were unknown at the time of the guarantee. So the Hadith contained the conditions for the validity of a guarantee, and the conditions for its contracting (In’iqad).

This is the guarantee in view of the Shar’a. By applying the pledge of insurance which is definitely a guarantee, upon it, we find that insurance is devoid of all the conditions which the Shari’ah enunciated regarding the validity and contracting of the guarantee. In insurance, there is no joining of a responsibility to a responsibility in any way. The insurance company did not join its responsibility to the responsibility of another to commit itself in paying money due to the insuring person so there is no guarantee; thus the insurance is void. In insurance, there is no financial right due to the insuring person from anyone that the insurance company committed
itself to pay. This is because the insuring person has no financial right against anyone that the company guaranteed, so insurance is devoid of the financial right. So the insurance company did not commit itself to any financial right so as to validate it as a guarantee in Shar’a. Moreover, what the company was committed to pay of compensation, price or money, was not a right due to the guaranteed person from other people at the time of concluding the insurance contract, whether immediately or potentially, so as to validate it as a guarantee. So the insurance company has guaranteed that which is not due either immediately or potentially, making the guarantee invalid and the insurance consequently becomes void. Furthermore, insurance does not include a person guaranteed for, because the insurance company did not guarantee for anyone a right due upon him so as to be called a guarantee; thus the insurance contract was devoid of an essential element required to exist in the view of Shar’a, namely the presence of the person guaranteed for. This is because it is essential that there should exist in the guarantee, a guarantor, a person guaranteed for, and a guaranteed person. Since the insurance contract did not include a person guaranteed for, it is void. Additionally, when the insurance company pledged to compensate for the object or pay its price if it was damaged, or pay money in case an accident occurred, it pledged to make this payment in return for a certain amount of money (or premium). So this is a commitment (Iltizam) in return for compensation which is not allowed, as one of the conditions for the valid guarantee is that it is without compensation. Thus the presence of compensation (premium for the insurance company) invalidates it. This clarifies the extent to which the contract of insurance is devoid of the conditions of guarantee which Shar’a has stated, and its failure to satisfy the conditions for concluding the guarantee and the conditions for its validity. Therefore, the pledge document (Sanad) which the company gives, guaranteeing thereby compensation and price or guaranteeing property is void from its basis, such that insurance, in its totality, is void in the view of Shar’a.

Therefore, insurance in its totality is prohibited by Shar’a, whether it is insurance on life, goods, property or any other thing(s). The reason for its prohibition is that its contract is void in the view of Shar’a; and the pledge which the insurance company gives according to this contract is void according to Shar’a. So taking money because of this contract and this pledge is prohibited, and it is considered to be the earning of money illegitimately which is included as illicit money (Mal as-Suht).

23 comments:

Momo said...

What to do if an insurance is obliged (Belgium).

car insurrance is obliged to take;

and if insurances is haraam, what to do if something happened with me or a muslim who doesn't have insurances and He has to pay a large amount which he himself doesn't have. Here is no other sytem. I had this thaught: because of a lack of sytem, I need other non obligatory insurances. if there was an other halaal system, then ofcourse i would use it.

Abu Adam said...

assalam alaikum. i found this explanation very confusing and technical. as well, i felt it could have been broken down into smaller paragraphs as it was too much points that needed to be seperated.

anyhow, what was lacking was answers to the more practical questions such as the one Momo indicated above.. How would an Islamic System replace the concept of interest? Would it be covered by the state? i.e. if I had an accident and destroyed someone's property (unintentionally) would the state pay or would I be obliged to pay or would nobody pay?

This and many other questions lie open in my mind..

Islamic Revival said...

Please refer to the following books which you can download which deal with the issues you've raised and will give you a broader picture of the Islamic Economic system:

http://www.khilafat.pk/home/images/books/english/the_economic_system_of_islam.pdf

http://www.khilafat.pk/home/images/books/english/funds_in_the_khilafah_state.pdf

Islamic Revival said...

Regarding the question of vehicle insurance:

1. In a situation where the insurance is compulsory so that you can get a driving license and if this is not possible unless you get insurance, then if you:

• agree with a non-Muslim middleman to get you ‘a license’ in return for a sum of money which you would pay him, without you signing a contract with the insurance company or assigning someone to sign on your behalf
• or agree with the middleman to bring you a ‘insurance document’ without you sighing or assigning someone to sign on your behalf with the insurance company then when he brings you the document and you complete the steps to get the licence.
• or agree with the middleman in return for a sum of money that he gets an insurance document for you – in the above manner, without you signing or assigning someone to sign – which allows you to drive a car without being stopped by the traffic police according to the law.
• Or agree with the middleman in return for a sum of money to bring you an insurance document in the above manner with permission to drive a car without going against the law even if the permit is of less authorisation than a licence, if it allows you to drive without breaking the law.

All of this is allowed by the Sharee’ah as we are liable for our contract which would be purchasing the certificate and not entering into the contract of insurance. Therefore it would only be permitted to utilise the certificate for the purpose of showing it to the authorities and not to use it as a real insurance policy.

Islamic Revival said...

Further clarification regarding purchasing an insurance document:

1. All types of insurance are haram.

2. When looking at the contracts of insurance it was said that if an insurance company agrees on just selling you a paper and you reject the benefit of claiming then this was ok from the shariah. However after enquiring with all insurance companies, we found they will not accept these types of guarantees, regardless of what a sales assistant promises, in order to sell you insurance. So dealing with an insurance company directly would be in contravention of the shariah.

3. However, after study, engaging with a non-Muslim middleman (i.e. a broker) where your contract is to purchase a document so that you can drive is allowed as long as your contract with him is on the purchase of a document to drive. This is regardless of whether he goes to buy an insurance document to pass onto you, as your contract is with the broker.

So you can obtain a cover for insurance as long as the following is kept in mind,

a) do not directly have a contract with the insurance company,

b) you do not contract with the broker to sign on your behalf (wakalah) a contract with the insurance company but rather ask to obtain a cover to drive and your contract is with him not through him as a representative of yourself.

4 Consequently there must be a separate contract with you and the broker and there must be a separate contract between the broker and the insurance company in order for you to free yourself from the sin.

5 Most brokers are used to acting on your behalf i.e wakalah which is prohibited, so you must explain clearly that this arrangement is not acceptable. We have found one broker for example who will operate on the separate contract basis which is permitted. And it seems others will do it.

6 Once you have obtained the insurance document in the shari manner, it of course remains forbidden to benefit financially if an accident occurs, as the nature of your contract has been to obtain a document to entitle you to drive and not to benefit from insurance. So you cannot claim on the insurance, but can show the document for the purpose of the law.

You are reminded that your responsibility is to live according to the Shariah, and to live by the concepts of rizk and Qada wal Qadr. Allah (swt) will test Muslims with their adherence to the Shariah in the hard times.

Anonymous said...

assalamu alaikum,
Brother, how do you justify(according to the shari'ah) asking a middleman to make the contract when you clearly know that he is going to make a haram contract?

Islamic Revival said...

This is because we are not liable for the actions of disbelievers, so the middle man has to be a disbeliever and not a Muslim. There are various evidences for this, for example Umar ibn al Khattab accepted payment of Jizya from Christians who had sold pork in order to obtain the money and then gave it to Umar. The Sahaba all accepted this thus it constitutes an Ijma (consensus).

Anonymous said...

If you say we are not liable for the actions of the non-Muslims even when we make them do something Haraam then "Supari killing" (muder through a rowdy) through a non-Muslim should be OK?

Islamic Revival said...

No this does not mean that all, we have to understand Islamic law in detail and cannot make general analogies without evidence or logical conclusions. The principle mentioned only applies to financial contracts as the evidence relates to that it does not apply to other general crimes such as murder, theft, zina, etc.

Islamic Revival said...

Furthermore even in financial contracts you cannot ask a non-Muslim to undertake a haram action on your behalf for example if you go to a non-Muslim agent and ask him to buy you a train ticket by paying a bribe this is haram, as this would be wekala (delegation) and it would be as if you have done the action as you are asking him to do it on your behalf. However, if you went to him as an agent and asked him how much it would cost to get a confirmed train ticket, he may give you a price without telling you how he is going to obtain the ticket (which is the norm) - in this case there is a division of liabilities - your are not liable for his actions. Your contract with him is legitimate according to the shariah, it is for a ticket for a specified price. Now if he decides to get the ticket by other means you will not know that and are not liable. Of course if he informs you that he is going to use bribery or another haram method to obtain the ticket then in this case you cannot continue in the contract.

Anonymous said...

Assalam Alaikum,

Bro i need details of this analogy to bring Non-Muslim as a middleman ir order to understand. What is the Illah behind this.? all details..

Jazak Allah

Islamic Revival said...

This is not based on analogy (qiyas) and therefore there is no illah. Rather it is based on daleel from Ijma as-Sahaba as stated earlier: Umar ibn al Khattab accepted payment of Jizya from Christians who had sold pork in order to obtain the money and then gave it to Umar. The Sahaba all accepted this thus it constitutes an Ijma (consensus).

ABDULLAH said...

As Salamu Aleykum Ustadh,

could you please answer me the question whether flat rates are halal in islam, because you don't know the exact benefit resulting from the contract.

e.g. delivery charges flat rates in online shops: i pay 10 eur in advance in order to get all upcoming orders within 1 year for zero charges.

or even more important: mobile phone flat rates. the benefit you will obtain is not sure, but we pay a certain sum in the end of a month independently whether we use our anytime minutes or not.

you answer would be very much appreciated.

baarak allahu ffek

ABDULLAH said...

is so called TAKAFUL halal?

Islamic Revival said...

Your first example is not clear to us please elaborate. the example of mobile contracts is not as u said, as the benefit is sure it is up to u to utilise the benefit or not. It is like renting a car, it is up to u to use it or leave it parked

ABDULLAH said...

jazakallahu khair for your reply.

clarification of the first example:

there is a online where you have to pay delivery charges for every order. BUT, you can choose to pay 5 eur each order or you pay 10 eur and then you will get a delivery charges flat rate, valid for 1 year.

Anonymous said...

Assalamu alaikum,

JazakumAllahu khayr, very helpful.

I do have a question though. You mentioned above that it is halal to make a contract with a middleman knowing he is going to make it a haram contract. This is because you are not liable for the actions of a disbeliever.

But then below you said with the train example, if the nonmuslim man informs you he is going to use a haram method to obtain a ticket, this is haram.

This seems contradictory to me, could you please elaborate inshAllah?

Waalaikum as salam

Islamic Revival said...

There is a difference between delegation (wakala) and the division of liabilities. It is haram to delegate anyone to perform haram on your behalf whether Muslim or non muslim. This differs from engaging in a legitimate contract with a non muslim without asking him to do any haram on your behalf, you are not liable for his action as long as ur request is halal, e.g. u go to a money exhange like Thomas cook to exhange rupees to dollars which is halal if it is done hand to hand, u know that the way they may have obtained those dollars is through exhanging not in accordance with the shariah rules, u are not liable unless u ask them to obtain the dollars for u in a haram way. In the example from ijma from umar (ra) he did not ask them to sell pork to pay him, he asked the dhimmis for jizya, they sold pork to disbelievers and paid the jizya with that money

Aamir said...

Salam

@Islamic Revival , @abu Ismael

Any material, books etc regarding hukme sharai about Insurance and the opinion of different schools of thought on it ? And how it effects economy.

Aamir Zeb

Anonymous said...

Assalamoalaikum-

dear all, one important thing about asking a middle man to do some thing is - it is compulsory to have insurance no just a wish or for own benefit-

so if you are asking a middle man to do some thing filthy which is not a compulsion but just for own benefit then it is not allowed-

hope i have cleared my point of view

Anonymous said...

salam brother

I have read all the above regarding insurance, and the advise regarding using a middle man to get insurance certificate to show for legal reasons.

the question that I have is in my country it is legal requirement to have a valid insurance certificate if you wish to drive. you can be fined and put in prision for driving without.

There is absolutely no way of finding a middleman as mentioned above as it does not work that way here. either you do it yourself or you have wakeels.

SO there are following options. either i do not drive at all which would create a significant hardship on life, and even effect productivity as we are not moving around in our own cars.

My question is as this insurance is a legal requirement and being able to drive in this day and age is quite a need, is there a rukhsa that we take insurance just for sake of not being arrested and penalised?

please advise on this mu brothers. Jzk

Anonymous said...

Assalamu alaikum,

I am working in an organization where they have some tie up with insurance company, by default they included a Health insurance scheme for me which is deducted from my salary.

This is applicable for my wife and my child however l have to add their names but mine is included by default.

Is it permissible for me to claim the medical treatment bills and medicine bills?

Shall I add my wife's and my child's name?

Anonymous said...

Assalamu Alaikum Brother.

I have one question...

My friend is in need of money now. So, he plans to give his gold ornament as a mortgage and manage the situation. His question is " can the person who get the gold use that for any other purpose if my friend could not able to give back the money on time and also if the person is in need of his given money..?

Another thing is...

One person told my friend that he give half of money for gold worth and become partner in ownership with the gold... and he told my friend to take his own time to give back the money... meanwhile if that person is in urgent need of money, he give that gold to any other as mortgage and get money...

Are the above said two methods permissible for Us?

Jazakallah.