Insurance and Islam

While in the Western world the concept of insurance is considered undeniably beneficial, for Muslims the issue is not so black and white. Several Islamic Schools consider that the traditional insurance system is, if not Haraam, at least Makrouh, as it is dangerously close to what Muslims know as “Gharar“.

Even with all this, there are companies that provide insurance that falls under Islamic guidelines, and that are considered halal by most scholars.

Why is traditional insurance not suitable for Muslims?

Well, because it is quite similar to gambling, and it can offer to one money that he is not entitled to (from Islamic point of view). For example, regardless of what company of insurance you choose, you are supposed to pay a small amount of money monthly or yearly. In the case of an accident, the company offers a compensation that is, almost always, much bigger than the amount that you have paid so far.

So what is the solution?

The best approach for Muslims is to contact an insurance company that is made for them”Takaful“. Their policies are Halal and they do not offer money that can be considered “Haraam”. Does this mean that they offer a smaller compensation than traditional companies? In most cases, yes. Does this make them less effective? Not really.

In general, “Halal” companies only offer money that you have paid already. This means that it is better to look for a higher insurance, because it will provide you a higher compensation if something bad happens. This, of course, as long as you rightfully pay for it every month or year.

Since not all Islamic schools agree on these topic, it is recommended to do your own research before you decide what kind of insurance you want to get. 

Loredana Cristiana