Question Summary:
Is it permissible to use: 1. Home or property insurance? 2. Life insurance?

Question Detail:

Is it permissible to use:
1. Home or property insurance?
2. Life insurance?

Answer :

Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
1. Home insurance is defined as “Home insurance, also commonly called hazard insurance or homeowner's insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.”[1]
Home insurance is not permissible for the following three reasons:
1. 1. Qimaar (gambling): The home/property Insurance Company might receive more than the insured monies or might not receive any amount of money. This is the same as gambling. If the insured person is afflicted with any loss or damage to insured properties worth millions, he might receive more than what he has paid for or might receive less. This is exactly how gambling works.
2. Riba (Interest): If the Insurance Company receives premiums worth more than the value of the insured property, then that will be usury and interest. If there is any loss to the insured person’s property and the loss is worth much lesser than the total premiums that he has paid to the insurance company, such a person would be guilty of undertaking a usurious and interest based transaction.
3. Gharar (Future Uncertainty): The obligation of payment from the side of the insurance company is based on a future contingency, i.e. obligation of payment. This is termed as Gharar in the Shari’ah. Rasullullah (Sallallahu Alayhi Sallam) prohibited any transaction which has the element of Gharar.
 
2. Life Insurance is defined as “A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.”[2]
Life Insurance is not permissible for the following three reasons:
1. Qimaar (gambling): The Life Insurance Company might receive more than the insured monies or might not receive any amount of money. This is the same as gambling. If the insured person is afflicted with any loss or damage to insured properties worth millions, he might receive more than what he has paid for or might receive less. This is exactly how gambling works.
2. Riba (Interest): If the Insurance Company receives premiums worth more than the insured amount, then that will be usury and interest. If there is any loss to the insured person’s property and the loss is worth much lesser than the total premiums that he has paid to the insurance company, such a person would be guilty of undertaking a usurious and interest based transaction.
3. Gharar (Future Uncertainty): There is no certainty when the insured person will die. Therefore the insurance contract is based on an uncertain future event, i.e. death of the insured person. Rasullullah (Sallallahu Alayhi Sallam) prohibited any transaction which has the element of Gharar.
And Allah Ta’āla Knows Best
Ismail Desai,
Student Darul Iftaa
Durban, South Africa
Checked and Approved by,
Mufti Ebrahim Desai.