Is Insurance Haram?

Is Insurance Haram?
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be
upon HisMessenger.
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you place in us, and we implore Allah Almighty to help us serve His
cause and render our work for His Sake.
Responding to the question, Dr. Monzer Kahf, Scholar in Islamic
Economics & Financial Expert, states the following:
"In the circles of contemporary Shari'ah scholars, there are three
opinions about life insurance. They all recognize that it is a
newcontract not known in the history of Fiqh. A minority consider it
haram and with all kinds of argument against it including Riba,
gambling, gharar and speculation on the will of Allah. This view does
not carry muchweight.
The second view is that itcontains gharar because no one knows whether
the liability of the insurer(the company) will ever materialize nor
when it will , if ever. This is a serious gharar that leads to a major
defect in the contract. It is therefore forbidden.
The third opinion is presented by the late Sheikh Mustafa al Zarka. He
argued that the gharar in the contract is remedied by the fact thatit
is a contract based on overwhelming statistical knowledge and the
application of the theory of probability. With this in mind, there is
no gharar on the part of the insurer and the contract is permissible
with two conditions: that it contains no Riba clause and that its
subject (insured thing) be legitimate. These two conditions rule out
regular fixed return life insurance because the value of the policy is
the outcome of investment premiums at a compounded rate of interest,
(while variable - return life is permissible if the funds are invested
in the Shari'ah approved stocks or mutual funds). They also rule out
insuring a prohibited activity such as casinos.
The advocators of the second opinion argue that the gharar problem
applies only in exchange contracts. If the contract is modified and
restructure on the basis of cooperation or mutuality, where there will
be an association of the insured instead of a profit motivated insurer
company, the gharar is then tolerated. This is so because the relation
between the association and its members become based on contribution
or tabarru' rather than exchange and a tabarru' can accommodate
certainconditions ( i.e., that the association compensate in case a
hazardous eventhappens). On the basis of this all the "Islamic
insurance companies" were established.
In this regards, al-Zarka adds, that if a mutual or cooperative
insurance exists he prefers it to profit motivated insurance out of
his respect to the opinion of opponents. There is an old argument
(from the 1950s), even by those who oppose insurance, that whenever
insurance is forced by law, one must do it and one is excused, from
the Shari'ah point of view. This include car insurance, social
security,workman compensation, and employer's imposed insurance if it
is not optional for the employee to this we add another element that
if the insurance provided by the employer is paid completely from the
employer, i.e., given as a fringe benefit without deducting any part
of thepremium from the pay checks, then it is a kind of grant from the
employer and if a hazard happens the paid policy amount is halal
because the it is an outcome of the grant.
Now think for yourself: if your life insurance is onlyterm life, you
may apply the opinion of Sheikh al-Zarka, and if it is imposed by
employer, you also have room to accommodate, and if it is a grant from
employer it is also tolerated. Otherwise you need to see the specifics
of the contract you have and determine, in the light of the above
briefing, whether you keep or seek to withdraw from it."