Concept of Conventional Insurance in Islam

Insurance is a premium which is paid to the person in case of any sort of loss or damage that occurs in a well defined time. Conventional insurance in Islam has many different concepts but the concept of well known Muslim scholars have great ground breaking logic which clears the concept of conventional insurance. 

Conventional Insurance formation 

Conventional insurance is something which is like an agreement between the company and the client and the client pays an amount to the company and if any loss occurs in well decided time the company pays for the losses to the client. Insurance companies take these funds and invest them or loan to other people on the high-interest rate and provide the percentage of the interest to the client also when the damages occur. 

Islamic Concept 

In Islam, many aspects of insurance were opened and after great discussion, it was found that it follows many ground rules which are prohibited by Islam. The main few reasons which are as follows:

Riba (Usuary)

In Islam and in the sharia law, Riba is prohibited and the methods by which generated are also prohibited. In Insurance, the company takes your funds for the time period and then provide a loan to people on very high-interest rates. These interests are then earned by the company and the company places a small portion of this into the client’s account. This makes claim on losses Haram for the people when they suffer. 


Gambling is also prohibited in Islam and is considered an immoral activity. Gambling is when a person places a bet for a claim of money on the chance and if he is right on his chance, he earns double the money for his initial money. The same concept applies somewhat to insurance. The insurance company takes your money and makes a claim that if you have losses in the given time, the company will pay otherwise the money will be lost. If a person has life insurance and dies the next month of payment, the company losses and has to pay. But if the person doesn’t die, the money is lost and the company wins. Thus this shows the concept of gambling which is prohibited in Islam. 

But this is not always the case as the money is given back to the person if he doesn’t die. Rather they invest the money in the high-interest bank which in Islamic concept is wrong and prohibited. 

Removes on faith on self-reliance

The biggest problem with insurance in Islamic concepts is that it removes faith from Allah and also on self-reliance. This is considered Haram and has strict punishment. By agreeing to the insurance terms, you sell half of your life on a fair chance that you will face a problem. This causes a person to lose faith and become a slave to the world and never trying to do anything out of the box. 

Hammad Ul Haque