Is health (and life) insurance allowed in Islam?

I asked several prominent scholars and they all told me that insurance is allowed in Islam. The rationale is that insurance is a social co-sponsorship contract (Takaaful); everybody pitches in so that the ones who eventually need coverage can be helped.

I had reservations about the allowance for life insurance, but I’ve been told by several Islamic scholars that the same concept of Takaaful applies to life insurance too, because the proceeds go to cover funeral and probate expenses, etc.

2 Responses to “Is health (and life) insurance allowed in Islam?”

  1. Zayan says:

    AssalaamuAlaikum brother.

    I do agree that insurance has become a must in the present day life. But don’t the insurance companies work on the concept of “riba” & isn’t riba haraam for Muslims? Can you please shed some light on it akhi?

    • noclash says:

      Suppose you borrowed money from a good friend and he charged you no interest. Later, you learned that he loaned money to other people and charged them interest. Does that make your transaction with him haraam (forbidden)?

      You are only responsible for your own transactions. If your transaction with the insurance company does not involve riba (usury), then it is halaal (allowed). God knows best.

      BTW, insurance companies do not necessarily make their money by lending it with interest. Some companies invest in projects, real estate or stocks. The business model of insurance companies has been profitable because of their reliance on actuarial tables. These are mathematical/statistical risk estimation models. They help an insurer decide how much premium to charge a customer such that when this, or any other customer has a claim then the insurer can afford to pay it out and remain solvent.

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