Shar‘i Ruling on Insurance (Bima / Inshurans)
Written by: Imran Ayyub Lahori
The term bima (insurance) is derived from the English word insure, which linguistically means “assurance” or “guarantee.” Since the insurer guarantees compensation for future losses and protection from risks, it is called “insurance,” and the company providing it is known as the “insurance company.”
It is essentially an agreement between the insured and the insurance company, in which:
Insurance companies collect these funds to lend them at interest, invest in trade, or buy property to generate profits. Shareholders earn large amounts without using their own capital, and from these profits, a portion is given to policyholders.
Although companies may claim to help those in distress, their primary objective remains profit-making.
➊ Life Insurance: Covers the whole body, but nowadays even individual body parts (hands, head, legs) are insured.
➋ Property Insurance: Includes buildings, factories, vehicles, ships, and similar assets.
➌ Liability Insurance: Covers responsibilities such as children’s education, marriage, etc., with the company taking responsibility for these costs.
Regardless of the form or type, all insurance is haram, because it involves:
Mawlana Rahmani states that those declaring life insurance permissible are mistaken.
Insurance is essentially making riba or gambling lawful, because:
The extra amount paid by the company:
The claim that it is a mudarabah (profit-sharing) partnership is false, because:
Additionally:
Insurance is a product of the Western capitalist system, fundamentally incompatible with Islamic principles. Life, property, and similar insurance contracts are prohibited in Shari‘ah due to containing riba, qimar, and unjust consumption of wealth.
Reference: Risalah: Bima ki Haithiyyat Islam ki Nazar Mein, pp. 5–7
Written by: Imran Ayyub Lahori
Definition and Nature of Insurance
The term bima (insurance) is derived from the English word insure, which linguistically means “assurance” or “guarantee.” Since the insurer guarantees compensation for future losses and protection from risks, it is called “insurance,” and the company providing it is known as the “insurance company.”
It is essentially an agreement between the insured and the insurance company, in which:
- The insured pays fixed premiums over time.
- After a set period, the company returns the amount to the insured or his heirs according to the agreed terms.
- Along with the principal amount, an additional fixed percentage (called “bonus” or “profit” in their terms) is given, which in reality is interest (riba).
Insurance companies collect these funds to lend them at interest, invest in trade, or buy property to generate profits. Shareholders earn large amounts without using their own capital, and from these profits, a portion is given to policyholders.
Although companies may claim to help those in distress, their primary objective remains profit-making.
Main Types of Insurance
➊ Life Insurance: Covers the whole body, but nowadays even individual body parts (hands, head, legs) are insured.
➋ Property Insurance: Includes buildings, factories, vehicles, ships, and similar assets.
➌ Liability Insurance: Covers responsibilities such as children’s education, marriage, etc., with the company taking responsibility for these costs.
Summary Ruling
Regardless of the form or type, all insurance is haram, because it involves:
- Riba (Interest): The insured receives more than what he paid, without labor, as a predetermined profit.
- Assisting in Interest-Based Businesses: Insurance companies invest funds in usurious transactions.
- Qimar (Gambling): Neither party knows who will bear the loss; the outcome is based on chance.
Fatwa of Mawlana ‘Ubaydullah Rahmani Mubarakpuri (رحمه الله)
Mawlana Rahmani states that those declaring life insurance permissible are mistaken.
Insurance is essentially making riba or gambling lawful, because:
- If the insured person, animal, or property perishes before the term, the company pays the full insured amount to the heirs.
- If it remains safe until the end of the term, the company returns the premiums plus a fixed profit.
- If the insured stops paying premiums (deliberately or due to hardship), the company confiscates the amount already paid.
The extra amount paid by the company:
- Is neither charity nor a gift.
- Comes from interest-based investments or later policyholders’ contributions.
The claim that it is a mudarabah (profit-sharing) partnership is false, because:
- In mudarabah, both profit and loss are shared.
- In insurance, only a fixed, predetermined profit is guaranteed, and no actual loss is shared.
Additionally:
- Giving one person’s money to another without a Shar‘i reason is unlawful.
- Confiscating paid premiums is batil (invalid consumption of wealth).
Conclusion
Insurance is a product of the Western capitalist system, fundamentally incompatible with Islamic principles. Life, property, and similar insurance contracts are prohibited in Shari‘ah due to containing riba, qimar, and unjust consumption of wealth.
Reference: Risalah: Bima ki Haithiyyat Islam ki Nazar Mein, pp. 5–7
