The Ruling on Car Insurance

Question: In some countries, theft is very common. Is it permissible, for example, to insure a car or other items?

Answer: Insurance is forbidden; this is the basic ruling, because it involves riba (usury or interest) and gharar (excessive uncertainty in a contract). The insured person pays a small amount of money and receives a large amount, or perhaps receives nothing at all. The company may also suffer great financial losses. However, one should not say, "I will take from this person and that person and that person, so I will make a profit on one side." On the other side, the insurance company might receive ten thousand from a person and lose tens of thousands on his account. This is where the gharar (excessive uncertainty in a contract) comes from.