Ruling on car insurance

This question was put to
Prof. Dr. Sa’ood ibn ‘Abd-Allaah al-Fanaysaan, the former dean of the
Faculty of Sharee’ah in the Imam Muhammad ibn Sa’ood Islamic University, and
he replied: Car insurance is not permissible because it insures one against
accidents involving others, and this kind of insurance comes under the
heading of commercial insurance which is forbidden in sharee’ah, because it
is based on uncertainty and consuming people’s wealth unlawfully. The fatwas
of the majority of scholars in fiqh councils and fatwa organizations forbid
commercial insurance as it exists today in most countries of the world, if
it is optional and no one is obliged to purchase it. But if it is compulsory
insurance and one has no choice, then it is permissible to take out car
insurance, for example, and the sin is on those who forced others to do it,
based on the principle of “necessities which make forbidden things
permissible”. But the person who is forced to take out car insurance, for
example, should not take more than he paid, if the company compensates him
for harm suffered, based on the principle of “necessity should be properly
estimated (without exaggeration)”. The Muslim should strive for the sake of
his religious commitment and honour, and keep away from haraam things or
that which may be haraam, as mentioned in the hadeeth narrated by al-Nu’maan
ibn Basheer: “That which is halaal is clear and that which is haraam is
clear, and between them are doubtful matters which many people do not
understand. Whoever guards against the doubtful matters will protect his
religious commitment from shortcomings and will protect his honour from
slander, but whoever falls into that which is doubtful will fall into that
which is haraam …” Narrated by al-Bukhaari (2051) and Muslim (1599). And
Allaah knows best. End quote. 

Among the fatwas of
scholars on the ruling on car insurance are the following: 

1 –Fatwa by Shaykh Ibn
‘Uthaymeen (may Allaah have mercy on him), when he was asked: Recently there
has appeared that which is known as insurance, for wealth, business and
cars, and there are now companies which deal with this and insure cars in
the sense that if the car is in an accident they will pay for its value and
if people are killed as a result of the accident they will pay the diyah
(blood money). What is your view, seeing that they describe the insurance as
a kind of cooperation? What is your opinion, may Allaah reward you with
good? 

He replied: According to
what you have mentioned, we think that this is haraam, i.e., for the car
owner to pay money each month or each year to this company, and the company
will pay up if an accident happens with this car. We think that this is
haraam, and that it is a kind of gambling, which Allaah mentions alongside
worshipping idols and drinking alcohol. Allaah says (interpretation of the
meaning):  

“O you who believe!
Intoxicants (all kinds of alcoholic drinks), and gambling, and Al‑Ansaab
(stone altars for sacrifices to idols etc) and Al‑Azlaam (arrows for seeking
luck or decision) are an abomination of Shaytaan’s (Satan’s) handiwork. So
avoid (strictly all) that (abomination) in order that you may be successful”

[al-Maa’idah 5:90]

The reason is that if this
policy-holder pays five hundred riyals per month, then he will pay six
thousand riyals per year, and perhaps he will have an accident in this year
which incurs costs of twenty thousand riyals, or perhaps he will have no
accident. If the former happens, i.e., an accident which incurs costs of
twenty thousand riyals, then the policy holder who paid insurance will be a
winner and the company will be a loser. But if the opposite happens and no
accident takes place during the year, then the company will be the winner
and the policy holder will be the loser. This is the essence of gambling, so
it is haraam and it is not permissible for a person to get involved in it.
Do not be deceived by what people do because Allaah, may He be blessed and
exalted, says (interpretation of the meaning): “And if you obey most of
those on the earth, they will mislead you far away from Allaah’s path”
[al-An’aam 6:116]. My advice to my brothers is to boycott this
insurance. As for their saying that it is a kind of cooperation, this is as
false as it can be. Can anyone who does not get involved in this insurance
benefit from this organization? No he cannot, rather it is insurance which
involves gambling. End quote from Liqaa’aat al-Baab al-Maftooh
(23/158). 

2 –Fatwa of Shaykh Saalih
al-Fawzaan (may Allaah preserve him) when he was asked: What is the shar’i
ruling on insurance where, for example, a person pays a sum of money every
month or every year to the insurance company to insure his car, in case an
accident happens in which his car is damaged, so that they will pay for the
cost of repairs, which may or may not happen to the car during this year,
but despite that he is obliged to pay this annual fee. Are such transactions
permissible or not? 

He replied: It is not
permissible to insure cars or anything else because it is a risk and it is
consuming people’s wealth unlawfully. What people must do is put their trust
in Allaah and if anything happens to a person by the will and decree of
Allaah then he should be patient and pay the costs and penalties that result
from that from his own wealth, not from the wealth of the insurance company.
Allaah is the One Who will help him with these things and others, so he
should not resort to insurance companies and what they involve of
risk-taking and consuming people’s wealth unlawfully. Moreover, when car
owners insure their cars and know that the company will pay the penalty,
this makes them careless when driving and so they may cause harm to people
and their property, unlike the case if they know that they will bear the
costs and they will be responsible, in which case they will be more
cautious. 

We said that insurance is
consuming people’s wealth unlawfully, because the penalty that is paid by
the company may be many times greater than the payments made by the policy
holder, so he is consuming people’s wealth unlawfully. Or the policy holder
may not be involved in any accident, in which case the company is consuming
his wealth unlawfully. End quote from al-Muntaqa min Fataawa Shaykh
al-Fawzaan. 

And Allaah knows best.