As Salam Wa Alaikum,

I am Julfiur Rahman and I am from India. Since last few days, I have been finding one solutions of one queston. It is about insurance policies in India.

I have already 3 policies with LIC (Life Insurance Corporation of India). But recently I came to know that insurance is haraam in Islam. My policy is for 10 years duration say. I don't have any idea what to do now.

Are all insurance working in India (ICICI, Relince Life. TATA AIG, SUN BIRLA etc) haraam according to sharia?

Is there any way that we can open insurance without violating sharia?

Many people say that insurance is about securing life or investing to get some profit. What is the accurate logic behind this according to Islam?

If insurance is not acceptable, then where should we invest our money?

Please give a proper solution so that I can rise awareness among other Muslim fellows regarding this topic.

asked 312 julfiurrahman's gravatar image
edited May 13 '12 at 18:48 goldPseudo ♦ 295215 goldPseudo's gravatar image

With the name of Allah the most Merciful AOA Dear Brother in Islam, It’s a very typical topic that only a few Scholars could dare to say it Haram completely. Here I’m raising some questions that will lead us to decide well so that Allah may not angry on us. Look every company working in Muslim areas will argue that it’s completely working as per Shariah (Rules of Islam) but in fact they are layers….. in order to understand the concept one need to have good knowledge of interest and part of it in generating inflation. Here I am going to explain it in simple words. Inflation is basically rising in price of commodities or you can say decrease in buying value of money e.g. you may daily see change in rate of Dollar for Rupees. This is due to inflation and interest is the main factor. Now many people will argue that if we lend one lakh to someone for a year then this one lakh will lose its buying value after one year. Hence, it would be loss for the lender. Yes of curse they are right but the thing is that lender can’t claim more on lending money as if he is claiming only a single rupee above one lakh then it will be treated as interest. Best solution of it is to lend most stable currency or in form of pure Gold on which inflation has zero or least impact so that lender may not face any future loss. Now come to the point. Banks and Insurance companies argue that they invest customers’ amounts in profitable businesses which are completely lying. As it’s their basic business to get cash from account holders and then lend it to borrowers on high interest rate. They earn money from loans and then pay to some of the depositors (say profit and loss saving account holders or to fixed deposit account holders). Almost every insurance company is property of Banks or a bank is property of insurance company. And as I have explained the earning criteria of banks which is completely interest based and therefore it’s completely haram. Insurance companies get premium or certain amount in form of installment for life insurance or for vehicle or other things for a certain time span as offered by the companies, e.g. In case of life insurance this period is mostly of 20 years. Now the insured person will pay amount annually for 20 years. They get this money from policy holders and then lend it to borrowers and collect heavy amounts from the borrowers that they use in future to settle the accounts of any deceived or injured person for compensation. This is how they are running interest based business and asking people that they are serving the nation. You may have questioned in your mind that how come it possible for them to manage big payback amounts after receiving small amounts from clients. Here I am giving you simplest example that may enable you to understand the inner GAME. Suppose I am the person offering you to get double amount after one month. Now you have trust in me and invested the amount. After one month I pay you two lakh and you become surprised. Now it’s common to every human being that we always want to earn money with least effort. Now you will pay me again more amount at the sport or after some time and will ask other people that come with to double your cash. Let’s supposed ten people come to me daily with different investments we consider it Rs. 500,000 daily that I may collect from people and the same I have to pay ten lakh in future after one month at the same date today its January 1st. Now after one month I may have Rs. 150,00,000 (30*500,000). On February 1st I may pay Rs. 10 lakh to persons paid 5 lakh on 1st January and then ten lakh on 2nd Feb to satisfy 2nd Jan clients and so on. On Feb 10, I may have paid Rs. 100,00,000 out of the balance I have received for a month of Rs. 150,000,000 and remaining balance will be Rs 50,00,000. Still I have more money to spend whereas other greedy people will continue to deposit cash with me to collect double in after one month that you can assess better now after a very simple example that I’ll be very easily able to pay back them as per time. As till February 10 I may have received billions of amounts from the people and this chain will continue till world end and I may have no problem to pay back the promised double amount…………now what you say is it this business is Halal or leagal in eyes of Allah………………… of course it’s Haram as Exchange of same commodity with same is haram as per Sayings of Prophet Muhammad Sallalahu alihe wssallam. One can’t exchange low quality Dates with high quality Dates, first one is required to sale low quality Dates and after collecting money he or she can buy good quality Dates…..Hence insurance or any other Banking transactions are same dealing of money in exchange of money not in same value but after including some margin for the depositor or investor……………..This is the simple answer with regard to financial prospect.. Finally they argue they are serving to widows, orphans and needy persons which are appreciated by Islam. The answer is, they must serve them with right means and not on interest based things or they may not collect money to invest in above stated areas. This is the duty and obligation of Government to spent taxes on these people and not the dusty of insurance companies to deceive innocent people and throw them to Fire… Wllah hu Aalim

Prof. Jahan Zaib Pakistan School of Islamic Thought

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Asked: May 13 '12 at 03:40

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Last updated: Jan 22 '13 at 05:20


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