What is the ruling on insurance in all its types?

The questioner : Our masterThe Shaykh : The Muslim scholars have differed on the issue of insurance. Some have permitted it, some have forbidden it, some have made it permissible, and some have specified which types are forbidden and which are lawful. If you would be so kind as to give us your opinion on this issue, and may Allah reward you with good.

The Shaykh : Insurance in all its types is a form of gambling that has occurred in the modern era. Therefore, no type of insurance is permissible, whether it is for cars, real estate, persons, or any other material matter. This is because insurance in all its types is not matched by any work performed by the insurer other than luck and the lottery. Thus, there is no difference between what is called insurance today, what is called a lottery, what is called a charitable lottery, and the saying of Allah the Exalted: . Gambling is gambling. And our Lord, Mighty and Majestic, when He forbade gambling and the modern forms of gambling attached to it, it was because it is not based on the effort and toil of a person who may face profit, which is the common case, or loss, which is rare, unlike insurance. In reality, if a person were to strip away the influence of what he hears and the customs surrounding him, insurance is the worst gambling on earth, the worst gambling on earth. This is because the greatest gambler is the one most exposed to loss. Therefore, you hear of major gamblers that between one evening and the next they lost millions. But insurance companies do not lose. If even one company were to lose, all the companies would perish. This is because when they impose certain fees on those insured by the company, they have performed precise and very precise calculations. In the modern era, the device called the computer assists them and saves them much of the effort they used to perform previously. For example, a life insurance company—you probably all know that they do not insure the life of one who has reached an age like mine, because they know that this person is on the edge of the grave. They perform precise calculations, but I think there is a rule with them, something close to sixty.

Another questioner : Under sixty.

The Shaykh : Under sixty. This is it. Why this limit? Because they perform precise and very precise calculations that they will lose if they also accepted insurance for the life of one who has passed sixty. Similarly, from their precise calculations, they calculate in every town what accidents might occur with cars, and this is very easy for them. Let us suppose they calculate that there are, for example, a thousand accidents every year, and they calculate what the damage to each car might be: is it damage meaning it was totally destroyed, or partial, and so on. Finally, they sum it up to come out to, say, one million dinars. So that if the insured cars are damaged, they calculate that they will receive from the subscribers one million and a quarter million. Ten percent of the million is enough for their profit, and so on. Therefore, the companies do not lose, and this is very clear when we depict the following picture and what corresponds to it: a person had barely driven his new car out of the company when it was smashed to pieces, and it was insured. He paid the first installment, and they compensated him for it. What is the amount of the installment? I do not know, twenty dinars. The type is that they paid for these twenty dinars, perhaps twenty thousand dinars, the price of a new car. Does anyone, no matter how foolish or little-thinking, think that the company actually paid these twenty thousand from its pocket and lost? No. These twenty thousand came from other insured persons who pay every year for ten or twenty years and do not have any accident. All of this accumulates with the company. When an accident like the first one comes to them, they pay from what they have saved from the other subscribers who did not have any accident. In the end, they have a surplus. This is gambling, in exchange for only writing, and there is no work. In the past, there was a type of insurance, for example, a ship loading from one port to another in the sea. There were known pirates in the sea, so they would send guards with the ship who would be ready to defend the ship if it was attacked by sea pirates. These guards are paid a wage because it is in exchange for work, and there is nothing wrong with that at all. As for the insurance known today, I am amazed at the scholars you mentioned who divided it, some forbidding something and some permitting something, and so on. All of it falls under the topic of gambling, which is gambling. Therefore, we do not advise a Muslim to insure anything, whether that thing is a car, a real estate property, a house, or the like. And here, of course, the issue of insurance that the state forces upon one arises.

Another questioner : The license.

The Shaykh : This is not a responsibility for him, because it is considered a tax like the other taxes imposed by the state. But here is a note that must be mentioned: if the insured person is forced by the state to pay for his car, and his car is damaged in an accident, and the company comes based on the agreement wanting to compensate him for the loss, then here we say: if what he paid equals what the company will compensate him with, or is more, then he may take it. But if it is like the first picture we assumed, where he bought a new car and did not drive it much before it was smashed to pieces, and he had only paid the first installment, and they compensated him for it, this is forbidden and not permissible. This is the detail of the issue. Please.