Insurance in Islamic Law

Insurance in Islamic Law

Difficulties with Commercial Insurance in Islamic Law

Clarifying Some Misunderstandings 

Some people have tried to compare insurance to the practice of al-`âqilah. This is where the tribe of a person found guilty of murder or manslaughter is held collectively liable to pay the blood money to the victim’s next of kin. This is very different from the insurance that we are discussing. This is purely an issue of legal accountability and is not a commercial contract between two parties 

Another common misconception that people often have is to assume that insurance is prohibited in Islam because it somehow compromises a person’s faith and his reliance on Allah. They allege that by taking out an insurance policy, the policyholder is displacing his trust in Allah and instead relying on the insurance company. 

This argument is not sustainable. As Muslims, we are commanded to consider natural causes and to take necessary precautions. This in no way compromises our reliance on Allah. We know that our providence comes from Allah. However, we must still go out to work and earn a living. We do so relying upon Allah, by His grace, to provide for us from the fruits of our labor. 

We are commanded by our religion to take precautions against loss. Anas ibn Mâlik reported that one day a Bedouin riding a camel came to the Prophet (peace be upon him) and asked him: “Can I leave the camel alone and trust in Allah?” The Prophet (peace be upon him) replied: “Tie your camel first, then put your trust in Allah.” [Sunan al-Tirmidhî] 

The issue with insurance is not a matter of a person’s reliance on Allah. It is purely a matter of Islamic commercial law. And this is where the problems arise.