Insurance in Islamic Law

Insurance in Islamic Law

Difficulties with Commercial Insurance in Islamic Law

What is Commercial Insurance? 

An insurance policy is essentially a contract between two parties whereby one party (the policyholder) pays a fixed premium to another (the insurer) in return for the insurer bearing full or partial responsibility for possible financial losses incurred by the policyholder. 

There are many different types of insurance policies. There is life insurance. This is where a person pays a fixed premium to an insurer so that in the event of the death of the person insured, a predetermined sum of money will be paid by the insurer to a stated beneficiary or beneficiaries, who are usually the dependents of the insured party. 

There is health insurance, whereby the policyholder pays a fixed premium to an insurer so that the insurer will bear fully or partially the medical costs incurred by those covered by the policy. 

There is liability insurance. The policyholder pays a fixed premium to an insurer who agrees to bear the full or partial costs of any losses incurred by the policyholder on account of legal liability. 

Other forms of insurance can be taken out against the destruction, theft, or loss of specified property. 

All insurance policies share in there being a payment of a fixed sum of money to a party in lieu of that party assuming responsibility for a financial loss that may or may not take place and that may or may not exceed the amount that was paid.