Conventional insurance is based on a contract of exchange (sale) between the insurance company and the covered person. This contract is void because it has one or all of the following elements, which are not permissible from Shariah’s perspective:

  • Gharar:(Uncertainties) Conventional insurance has an element of Gharar due to the promise to pay a sum of money upon the occurrence of unsuspected events
  • Maysir: (Gambling) Existence of gharar (uncertainties) leads to maysir (gambling) in conventional insurance. The insured may either lose all the premiums he has paid or be compensated for the losses he incurs for the insured event
  • Riba: (Usury/Interest) The investments of insurance funds in interest-bearing securities such as bonds and stocks, which do not comply with Shariah principles, pose a major problem for Muslims who purchase conventional insurance.

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