Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)

One of our brothers/sisters has asked this question:

Dear brother burhan,Assalam va alaikum.

I am a wholeseller. Three years back I had lost all my stocks in cyclon floods.I had insurance,neither for my shop nor the stocks.I lost a huge amount of money.I actually believe that rizq is provided only by allah and no entity.But now I am in two mind wheather to secure or not,my stocks against fire,riots and floods by insurance.Please advice your islamic view point.I will appriciate your early reply.jazakallah. 

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Answer:

Insurance

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is none worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.

The concept of ‘insurance’ per say in its essence is not prohibited in Islam; it is the ‘riba’ or interest element, which is the financial back-bone of modern day conventional insurance, is what has been declared haraam and absolutely prohibited in Islam.

At the times of the Prophet Mohamed (saws) and the Rightly Guided Khalifahs, there was a system of ‘Bayt-ul-Maal’ or ‘central treasury’ of the Islamic State, which if needed, would play the role of being the insurers of its citizens….and when one amongst the citizens was burdened with a calamity or necessity which was beyond their means, the leader of the believers had the authority to relieve the person of his burdens and compensate the loss amount from the ‘bayt-ul-maal’.

Thus insurance in its essence is not what is prohibited in Islam, it is the interest element involved in modern conventional insurance which is deemed absolutely forbidden in Islam. Alhamdolillah, today there are many Islamic Insurance companies who provide insurance in various categories in accordance with Shariah and interest-free principles. If one is fortunate to live in a Muslim nation which have Islamic Insurance companies that provide insurance on Shariah or interest-free principles, then there is absolutely no harm in seeking insurance from such institutions.

But if one lives in a nation where there are no Shariah-compliant Insurance companies which provide cover for emergencies, and one sincerely believes that Allah Subhanah will accept their excuse on the Day of Judgment that they only took out conventional interest-based insurance only because they feared financial ruin for themselves or their family in case of an emergency; then it is entirely upto them whether they wish to take their chances whether or not their excuse will be accepted by Allah Subhanah on the Day of Judgment.

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me alone. Allah Alone Knows Best and He is the Only Source of Strength.

Your brother and well wisher in Islam,

Burhan