Question # 275: Assalamu aleikum va rahmatullahi va barakatuhu brother. Can you please help answer question related to insurance cards provided by employer? Can a Muslim use that card or not allowed? Or he or she can use it to the extent of value that company pays to insurance company and not exceed this amount?

Bismi-llahi r-raḥmani r-raḥīm,

Assalamu ‘laikum warahmatullahi wabarakatuh,

All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).

Dear questioner,

First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.

Shorter Answer: All commercial insurance contracts (life, automobile and medical), whereby the insurance company is obliged to pay, should the damage insured against actually occur, in return for fixed premiums paid by the insured, are invalid due to the presence of uncertainty (gharar), unknown elements (jahalah) and other causes of invalidity. Hence, the basic principle is that commercial insurance is haraam (not permissible), except under two circumstances:

  1. When required by law, or
  2. Resorted to under conditions of general necessity (hajat `ammah) when this takes the place of exigent need (daroorah); for example, the person is not able to cover the cost of treatment on his own without having insurance.

In contrast to buying commercial health insurance, which is prohibited; when the employer offers health insurance to his employees, while the employee neither pays for it, nor he sign a contract with the insurance company, it is counted (from the employee’s perspective) as a gift or grant, or at least, a part of the package offered to him by his employer. Therefore, it is allowed to take advantage of such employee benefits. Also Refer to Question # 72: Life Insurance

Long Answer: According to shari‘ah, all types of commercial insurance (life, automobile and medical) are haraam as they involve Gharar (the transaction which involved some uncertainty, such as a transaction in which the insured/client does not know whether or not he will be compensated by the company (uncertainty), and how much the compensation will be in case of its occurrence (ambiguity)), and transactions which involve Gharar are forbidden according to many sahih ahadith, such as the Hadith narrated by Abu Hurayrah (رضي الله عنه):  “The Messenger of Allah (صلى الله عليه و سلم) forbade transactions determined by throwing a stone (this was a type of transaction that was prevalent in the markets of pre-Islamic Arabia, whereby a stone was thrown by either the buyer or the seller, and whatever it touched, its transaction became binding) and transactions which involved some uncertainty.” (Narrated by Muslim) (Fatwa of Main Khalid Al-Qudah, Member of the Fatwa Committee of Assembly of Muslim Jurists in America)

However, commercial insurance (for medical and automobile) is permissible to deal with it in only two cases:

  1. When a person is forced to do so, such as if he is forced to take out insurance on his car or a company forces its employees to take out health insurance. In that case the sin is on the one who forces people to do that. [In contrast to buying commercial health insurance, which is prohibited; when the employer offers health insurance to his employees, while the employee neither pays for it, nor he sign a contract with the insurance company, it is counted (from the employee’s perspective) as a gift or grant, or at least, a part of the package offered to him by his employer, exactly like the salary he takes and the paid leave vacation and so on. Therefore, it is allowed to take advantage of such employee benefits. (Fatwa of Main Khalid Al-Qudah, Member of the Fatwa Committee of Assembly of Muslim Jurists in America)]
  1. When a person is compelled to take out health insurance or he is in great need of it because he is not able to cover the cost of treatment from his pocket without having insurance.

This is a need which makes it permissible to deal with health insurance according to a number of scholars, because the reason for the prohibition on this insurance is the ambiguity and the element of gambling, not riba. When it is like that, it is permissible in the case of need.

Among the statements of the scholars that what is forbidden because of ambiguity is permissible in cases of need are the words of Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him): “The same applies to ambiguous transactions, which are a kind of gambling, but some types may be permissible in the case of need and where it serves a clear interest… Ambiguous transactions are forbidden because they are a kind of gambling which may lead to consuming people’s wealth unlawfully. But if that is countered by a greater harm, that makes it permissible so as to ward off the greater of two evils by putting up with the lesser. And Allah knows best.” (Majmoo‘ al-Fataawa)

He also said: “The evils caused by ambiguous transactions are less than those caused by riba, therefore a concession is granted when there is a need, if the prohibition on ambiguous transactions may cause greater harm than the transaction itself…” (al-Fataawa al-Kubra)

(Islamqa.info)

[In summary,] the basic principle regarding commercial insurance contracts, regulated by commercial insurance laws and practiced by commercial insurance providers (such that the company is a real partner in the contract and is obliged to pay should the damage insured against actually occur, in return for fixed premiums paid by the insured throughout the period of insurance), is that it is an invalid contract due to the presence of uncertainty (gharar), unknown elements (jahalah) and other causes of invalidity. The basic principle is that no commercial insurance is permissible, except when required by law or resorted to under conditions of general necessity (hajat `ammah) when this takes the place of exigent need (daroorah). (AMJA Fatwa)

Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.

Wassalaam