The Difference Between Cooperative Insurance and Commercial Insurance
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The questioner:
What is the difference between cooperative insurance and commercial insurance? Commercial.
The Shaykh:
In fact, there is no such thing as cooperative insurance. What is called cooperative insurance is actually a cooperative association, in which benefactors donate money to those in need, and anyone who needs it receives funds from this association. This is not insurance; calling it insurance is incorrect. It is a charitable association. Insurance, as understood internationally and by people in general, is when they gather and pay money, and it has employees and a company that develops it. Then, if one of them is affected, the insurance company covers the fine on their behalf from the people's money. He pays a small amount, and if a large fine occurs, reaching hundreds of thousands, the people participating in the insurance bear it.
So it consumes the money of people unjustly. He pays a little and gains, and consumes the money of other people unjustly. This is a gamble and a wager. Is this not permissible?
So insurance is forbidden. This cooperative thing, which is called insurance, is actually a charitable association, not insurance. But calling it insurance, I do not know where this term, "cooperative insurance," came from. If it were called a cooperative association or a charitable association, that would be appropriate for it. Yes.
What is the difference between cooperative insurance and commercial insurance? Commercial.
The Shaykh:
In fact, there is no such thing as cooperative insurance. What is called cooperative insurance is actually a cooperative association, in which benefactors donate money to those in need, and anyone who needs it receives funds from this association. This is not insurance; calling it insurance is incorrect. It is a charitable association. Insurance, as understood internationally and by people in general, is when they gather and pay money, and it has employees and a company that develops it. Then, if one of them is affected, the insurance company covers the fine on their behalf from the people's money. He pays a small amount, and if a large fine occurs, reaching hundreds of thousands, the people participating in the insurance bear it.
So it consumes the money of people unjustly. He pays a little and gains, and consumes the money of other people unjustly. This is a gamble and a wager. Is this not permissible?
So insurance is forbidden. This cooperative thing, which is called insurance, is actually a charitable association, not insurance. But calling it insurance, I do not know where this term, "cooperative insurance," came from. If it were called a cooperative association or a charitable association, that would be appropriate for it. Yes.
Source
شرح بلوغ المرام من أدلة الأحكام [ صالح الفوزان ]، تابع كتاب الجهاد - 3 — islamhouse.com (57:15)
The Arabic text is a machine transcription of the audio recording.