In its classical concept, insurance is a means of
helping individuals who are afflicted with damage and loss. Therefore, in its
essence, it is a philanthropic and humanitarian undertaking. As such its
underlying spirit seems very noble.
Today, particularly due to the absence of a state system
of security and insurance in most underdeveloped countries, there are a number
of insurance companies in the private sector which are doing this job. Also,
it is known that they are based on interest. However, buying an insurance
policy cannot be regarded as forbidden since one is not taking interest in
doing so. At best, it can be regarded as furthering and promoting an evil,
which according to the Qur’ān (5:2) is ta`āwun `alā al-ithm (co-operation with
an evil) and which should be avoided as much as possible. So, a careful
approach would be to benefit from insurance policies only if a person feels
that it is necessary to do so in his circumstances. A person must decide for
himself in this regard instead of asking some external authority -- since it
is only he who is the best judge of any genuine plea that he may have.
There is one thing which must be kept in mind about all
policies in which the insured sum is greater than the sum total of all the
premiums and in which a person actually receives a "profit" when the policy
expires: this so called profit is actually interest. In such cases, he should
not benefit from this profit and spend it on the society without expecting any
reward from the Almighty, since this money actually does not belong to him.