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Is Public Liability Insurance Haram?


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#1 leb_r_ama

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Posted 18 March 2010 - 05:22 PM

Salaams everyone,

Just a quick question....does anybody know if public liability insurance is haram?
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#2 FatBoyMuslim

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Posted 18 March 2010 - 08:53 PM

waleykum selam

the scholars i trust have given me a fatwa that any insurance in a nonmuslim country is halal in the current times we live in considering the social, political and financial circumstances of the world we live in

you need to ask scholars you trust

#3 alaq

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Posted 18 March 2010 - 09:19 PM

Which scholars if you don't mind me asking?
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#4 FatBoyMuslim

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Posted 18 March 2010 - 09:25 PM

not at all brother. the fatwa board scholars from jamia nizamia, hyderabad, india - a 100+ year old institution

#5 Ghaith

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Posted 18 March 2010 - 09:30 PM

I'll tell you next week.
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#6 tr3x

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Posted 18 March 2010 - 09:46 PM

Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert,

"In the circles of contemporary Shari'ah scholars, there are three opinions about life insurance. They all recognize that it is a new contract not known in the history of Fiqh. A minority consider it haram and with all kinds of argument against it including Riba, gambling, gharar and speculation on the will of Allah. This view does not carry much weight.

The second view is that it contains gharar because no one knows whether the liability of the insurer (the company) will ever materialize nor when it will, if ever. This is a serious gharar that leads to a major defect in the contract. It is therefore forbidden.

The third opinion is presented by the late Sheikh Mustafa al Zarka. He argued that the gharar in the contract is remedied by the fact that it is a contract based on overwhelming statistical knowledge and the application of the theory of probability. With this in mind, there is no gharar on the part of the insurer and the contract is permissible with two conditions: that it contains no Riba clause and that its subject (insured thing) be legitimate. These two conditions rule out regular fixed return life insurance because the value of the policy is the outcome of investment premiums at a compounded rate of interest, (while variable - return life is permissible if the funds are invested in the Shari'ah approved stocks or mutual funds). They also rule out insuring a prohibited activity such as casinos.

The advocators of the second opinion argue that the gharar problem applies only in exchange contracts. If the contract is modified and restructure on the basis of cooperation or mutuality, where there will be an association of the insured instead of a profit motivated insurer company, the gharar is then tolerated. This is so because the relation between the association and its members become based on contribution or tabarru' rather than exchange and a tabarru' can accommodate certain conditions ( i.e., that the association compensate in case a hazardous event happens). On the basis of this all the "Islamic insurance companies" were established.

In this regards, al-Zarka adds, that if a mutual or cooperative insurance exists he prefers it to profit motivated insurance out of his respect to the opinion of opponents. There is an old argument (from the 1950s), even by those who oppose insurance, that whenever insurance is forced by law, one must do it and one is excused, from the Shari'ah point of view. This include car insurance, social security, workman compensation, and employer's imposed insurance if it is not optional for the employee to this we add another element that if the insurance provided by the employer is paid completely from the employer, i.e., given as a fringe benefit without deducting any part of the premium from the pay checks, then it is a kind of grant from the employer and if a hazard happens the paid policy amount is halal because it is an outcome of the grant.

Now think for yourself: if your life insurance is only term life, you may apply the opinion of Sheikh al-Zarka, and if it is imposed by employer, you also have room to accommodate, and if it is a grant from employer it is also tolerated. Otherwise you need to see the specifics of the contract you have and determine, in the light of the above briefing, whether you keep or seek to withdraw from it."
Source(s):
http://www.islamonline.net
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#7 alaq

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Posted 19 March 2010 - 09:36 AM

not at all brother. the fatwa board scholars from jamia nizamia, hyderabad, india - a 100+ year old institution


Thanks

A minority consider it haram and with all kinds of argument against it including Riba, gambling, gharar and speculation on the will of Allah. This view does not carry much weight.


Thats not a minority opinion.

Paying $Y per month and then in a year receiving more the 12 x $Y sounds like riba to me.
Paying $Y just in case action 'Z' happens sounds like qimar to me.

Public liability insurance is a different story. It is wajib to earn a halal income enough to keep ones health, deen, family etc.
If the government says that you must take out public liability insurance if you own a business in your trade. Would that mean that it becomes halal when there is no Islamic insurance alternative? There is a sharia principle where when everything is haram it becomes halal. This is probably where FBM's scholars are coming from.

I would guess it would be halal because of necessity but I am not a scholar and would definitely seek advice prior to entering any contracts.
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#8 Omar_R

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Posted 19 March 2010 - 09:55 AM

just a side note
Public liability insurance, and Life insurance are forced on us and we dont have any choice in participating as we are
1. covered by public liability insurance by our employer when we commence employment with the majority of employers(because they are forced to have this insurance when they have employees)
2. Life insurance is a part of many superannuation plans which we are also forced to participate in
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#9 Ghaith

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Posted 19 March 2010 - 10:29 AM

It is accepted that anything which is obligatory by the law of the land, which would otherwise be haram, is permissible to the least extent possible.
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#10 Abdul Rahman

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Posted 19 March 2010 - 02:57 PM

just a side note
Public liability insurance, and Life insurance are forced on us and we dont have any choice in participating as we are
1. covered by public liability insurance by our employer when we commence employment with the majority of employers(because they are forced to have this insurance when they have employees)
2. Life insurance is a part of many superannuation plans which we are also forced to participate in

You can cancel the life insurance component of your Super. Any insurance you are compelled to take out by law takes the ruling of a tax.
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#11 Mind

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Posted 19 March 2010 - 10:28 PM

The type of contract is haram. It will always stay haram.

So the ruling is haram....

if it is forced upon you or you can not carry out every day duties without it etc.... does not make it permissible.

However, these factors will lift accountability (in the case of being forced for example).
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#12 Omar_R

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Posted 20 March 2010 - 07:44 PM

You can cancel the life insurance component of your Super. Any insurance you are compelled to take out by law takes the ruling of a tax.


I didnt know this! thanks for the info
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#13 Abdul Rahman

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Posted 22 March 2010 - 09:55 AM

The type of contract is haram. It will always stay haram.

So the ruling is haram....

if it is forced upon you or you can not carry out every day duties without it etc.... does not make it permissible.

However, these factors will lift accountability (in the case of being forced for example).

In the Hanafi madhab, if the insurance is compulsory like the Green Slip it takes the ruling of a tax the way you state your answer makes it sound like they have got it wrong.
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#14 Mind

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Posted 22 March 2010 - 06:19 PM

In Usul, a hukum does not change. There is only one hukum. However you may have a rukhsa which is part of the ahkam al-wada'.

Are you able to post a link to that ruling?

Also, can you be a little clearer about what it means when you say it takes on the ruling of a tax. what is the ruling of tax? Which of the 5 or 6 ahkam al-shari`a does tax full under?

We know there is haram tax, like income tax for example, that the Islamic state will not be allowed to impose. Then you have halal "tax" like the jizya or additional funds that the Imam imposes upon the rich to complete an obligation that otherwise would not have been satisfied if not imposed.

Or when you say that, it takes on the ruling of tax do you mean that it is a dhilm (oppression) that is forced upon you and you will not be accounted in the hereafter?

When one says that it takes on the ruling of a tax, one should clarify what the ruling of the tax is.

But referencing that fatwa will be beneficial too.

Did they clarify what the original ruling for insurance was?
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#15 leb_r_ama

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Posted 23 March 2010 - 11:12 AM

Jazakallah for the replies...I should have at the beginning stated it was the Hanafi madhab I was interested in...however...slightly off my original question...how is one meant to avoid these :( when the likes of complusory third party insurance is part of your vehicle registration...gst is included in most items...even the best of us end up paying 'tax' in one form or another...
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