Answer
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
Property insurance can be permissible in Islam, provided the contract adheres to Shariah principles, avoids interest or forbidden clauses, and addresses legitimate protection needs.
Responding to the question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:
What Is an Insurance Contract in Islam?
I really believe that the opinion of the late Sheikh Mustafa al-Zarka is excellently respectable, useful and consistent with the basic rules of the principles of Islamic Jurisprudence, and the objectives of the Shariah. In brief, his opinion can be summarized as follows:
The insurance contract is a new and useful one. It came about as a result of new technological inventions and new economic relationships that resulted in having a large number of people having similar protection needs.
We should be sure that the insurance contract does not violate any of the established rules of the Shariah. It has precedents in known contracts in the Shariah, and the ambiguity that appears in it is only because we look at it in isolation of the circumstances of its raison d’etre, the large number and applications of probability theory.
Conditions for Permissible Insurance Contracts
If the contract does not involve any other prohibition, it must be permissible. Examples of other prohibitions are: an interest clause or its subject being forbidden (e.g., transportation of alcoholic beverages).
Consequently, keeping the above in mind, it is permissible to insure houses, cars and belongings.
Allah Almighty knows best.
Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.