Buying a car in installments and being forced to pay insurance

Question 26: A man bought a car in installments, as he was unable to pay its price in cash. The car agency demanded him to pay car insurance. Respected Shaykh, what is your ruling on paying this insurance and other types of insurance such as life insurance?

Answer: It is permissible to buy a car in installments; if the car and the price are agreed upon as well as the amount of each installment and its due date of payment are fixed. As for paying car insurance, this is Haraam (prohibited)... read more here.

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Legality of insurance contracts in the light of Sharee’ah

Question 5: Modern insurance contracts imported from the West have become very widespread in our countries, so a good deal of Muslims subscribe to them. Many insurance companies and offices have also been founded. Furthermore, many Muslim merchants, factory owners and businessmen have subscribed in them as a guarantee for their imported goods and to redress any of their damaged or stolen goods or in case an accident occurs during construction operations, to factories or to workers in terms of destruction, loss, murder or harm.

Insurance may also compensate for the loss arising from accidents, robbery or damage that may happen to cars and may pay for the collapse of wells or mines and thus, the insurer escapes financial responsibility. Also, through life insurance the insurer’s heirs will receive compensation in case of his death.

In fact, there are many other fields of insurance which are classified, defined, specific conditions which are stipulated and for which annual installments are paid by the insurer to the company in defined amounts. Moreover, insurance companies organize insurance contracts pursuant to their own laws which are adopted and recognized by governments.

We would like your answer to our question regarding the legality of insurance contracts in the light of Sharee`ah (Islaamic law) and to explain the ruling on working for such companies.

Answer: All types of insurance are Haraam (prohibited), as they involve Jahaalah (sale with lack of knowledge) and Gharaar (fraudulent transaction where details about the sold item are unknown or uncertain) – which are unpardonable… read more here.

Insurance on cars, goods, factories and workers: What is the Islaamic ruling?

Question 29: What is the ruling on insurance such as cars, goods, workers and factories? Sometimes the person applies for insurance willingly. Other times they are forced to have insurance. For example a car dealer may stipulate that the customers must insure the new cars they purchase by installments. The same applies when a person sends goods from another country.We would like to know whether there are lawful and unlawful types of insurance. Is insurance considered a type of Ribaa (usury/interest)?

Answer: The type of insurance mentioned in the question, known as commercial insurance, is unlawful because it involves Gharaar sale (fraudulent transaction where details about the sold item are unknown or uncertain) and Jahaalah sale (sale with lack of knowledge) that cannot be overlooked. It also involves gambling, taking people’s money unjustly and Ribaa, which are all proved to be Haraam (prohibited) transactions according to religious evidence…read more here.

Life, organ and purchase insurance and all other types of commercial insurance

Question 49: A man bought a car in installments for being unable to pay its price in cash. The car agency demanded him to pay car insurance. Respected Shaykh, what is your ruling on paying this insurance and other types of insurance, such as life insurance?

Answer: It is permissible to buy a car in installments, if the car and the price are agreed upon, and the amount of each installment and the due dates of payments are fixed. Car insurance, is Haraam (prohibited). Similarly, insurance on life, organs, merchandise, and all types of commercial insurance are Haram. They involve Gharaar (fraudulent transaction where details about the sold item are unknown or uncertain), gambling, and unjustly taking people’s money… read more here.

Ruling on Automobile insurance

Question 48: A man bought a car in installments for being unable to pay its price in cash. The car agency demanded him to pay car insurance. Respected Shaykh, what is your ruling on paying this insurance and other types of insurance, such as life insurance?

Answer: It is permissible to buy a car in installments, if the car and the price are agreed upon, and the amount of each installment and the due dates of payments are fixed. Car insurance, is Haraam (prohibited). Similarly, insurance on life, organs, merchandise, and all types of commercial insurance are Haram. They involve Gharaar (fraudulent transaction where details about the sold item are unknown or uncertain), gambling, and unjustly taking people’s money… read more here.