First, most people do not know what insurance is. I mean what most people invest in India cannot be called Insurance.
There are 2 types:
- Pay premium, get coverage & no returns.
- Pay premium, get coverage & get returns at maturity/ intervals.
The 1st one is popularly known as Term Insurance and it is the only real life insurance. The second although not exactly an insurance is called by various names like - ULIP/ ULPP/ Pension Plan/ Endowment, etc.
Basically, insurance is only payment of a premium for an uncertainty. If the uncertainty happens, you get the money assured If everything is fine, you get nothing.
Arguments against insurance:
- Challenging Allah with Life: I don't see any challenge in this. We all know we are going to die. What we are doing is that, we pay a small sum, so that in any eventuality, our loved ones are financially secure.
- Don't have faith that Allah will help: Faith in Allah doesn't mean just don't do anything. You have to be ready for your death always- and readiness includes your deeds and too some extent planning for your family. If you have earned enough or have sufficient amount of wealth, then there isn't a need for Insurance. It's only the case that you know that if you die today, your family could struggle financially.
- Haram Investments: This issue comes in for those so called insurance which promise a return. Their investments could be categorized into interest and gambling based. As I already said, they are not insurance, hence the question doesn't arise.
- Uncertain Contracts/ Gambling: Most contracts/ dealings/ trades involve some degree of uncertainty. This is absolutely fine. It is only those which are 100% uncertain and based entirely on chance that are forbidden. Because in such cases, the chance of loss/ gain is very high and it could leave the losing party utterly sulking with loss.
- In pure Insurance, first thing there is certainty that death will occur, so the Insurance company is well aware of the risk; it is only the timing that is uncertain.
- Secondly all Insurance companies in India operate on a pan-India basis. They have huge no. of customers. There are statistical tables present that use the science of probability to find out the near-approximate calculations in deciding the premium and the profitability of the company. So there is not really a big gain/loss for any party. Note that most Insurance companies are making huge losses not due to Life Insurance but due to other Insurances.
- Thirdly, claim rejections in case of Life Insurance are low.
Recently the Darul Uloom Deoband banned insurance. If you read carefully, you will find that they are talking of interest and gambling aspects.
Regarding Interest part they do invest in interest bearing securities. However the claim is supposed to be paid from the premium collected. But we can never know for sure if the claim is paid from pooled premium or from interest income. This situation is somewhat similar to salaries paid by companies. You never know if your salary is paid from interest income of the company.
As for the gambling part, I have already explained above, not sure what else they are talking of in gambling. It would be great if someones can throw additional light on that aspect in a clear way with relevant references.
This is the Deoband Fatwa site, I am referring: http://darulifta-deoband.org
Based on the various responses given for Transactions & Dealing, you can research about it.
