Car Insurance: is it permissible?

Insurance service and contracts were invented and developed over the last four centuries in Europe, then extended to the Americas. They reached the Muslim World in the Nineteen century. Obviously, they were not known at the time of revelation of the Shari'ah nor at the time of the great scholars who founded the known Fiqhi Schools.

For more than a hundred years, Muslim scholars considered insurance as a new service that accompanies new risks intrinsic to technological applications, and as a contract. Thus, in addressing it, two points of view have been developed: one that studies insurance within the context of its environment, i.e., the presence of a large number of people exposed to similar risks that call for the application of the theory of probability and what is called the laws of large numbers; the other regards insurance as only a specific relationship between two parties regardless of its environment.

The first trend was led by the late Sheikh Mustafa Al-Zarqa. He argued that, as a new service and contract, insurance companies gather together the risks of a large number of people and redistribute them in a manner that makes them bearable. This is a form of lawful cooperation that is compatible with the general objectives of the Shari'ah and hence the theory of probability is taken into consideration, the insurance contract does not contain any unbearable amount of ambiguity or undue uncertainty.

According to this view all kinds of insurance contracts (cars, hazards, accidents, transportation, life, etc.) are all permissible provided two conditions are fulfilled:

1. The contract must not contain any Riba element.

2. The object of insurance must be permissible in the Shari'ah i.e., insuring a shipment of liquor is not permissible. It doesn't matter whether this cooperation is founded by a group of concerned persons in the form of cooperatives or by a venture person or a company that takes charge of offering the service of pooling together the risks of a large number of persons.

Consequently, car insurance is permissibleBy Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert
In the Name of Allah, Most Gracious, Most Merciful.

Reference:
www.islamonline.net/servlet/Satellite