Islam has not prohibited insurance contrary to commonly held beliefs. As far as the concept of insurance in Islam is concerned, it is to cover the risk of loss, or the “fortunate many helping the unfortunate few”. This concept is not only allowed, but also encouraged in Islam.
“Help one another in righteousness and piety, but do not help one another in sin and transgression”. (Al Quran 5: 2)
 Islamic sharia compliant Insurance is based on the principles of mutual assistance and co-operation through voluntary contributions to a common
fund that provides its members mutual indemnity in the event of loss i.e. occurrence of a fortuitous incidence like death, fire, accident, injury etc.

  • Islamic Sharia Compliant Insurance Contracts – Pre-Requisites
  • Adherence to Shariah (Framework of Islamic Law)
  • Permissibility (Halal) of activity
  • Haram activities (Not Permissible), avoided
  • No Gharar (Uncertainty)
  • No Riba (Usury, interest)
  • No Maisir (avoids speculation or speculator activities)

Types of Islamic Insurance
 There are two main types of Islamic Sharia Compliant insurance:

  • General insurance (Takaful) like insurance of property or insurance against injuries or mishaps such as fires, earthquakes, car accidents etc.
  • Personal (Family) insurance; which refers to indemnity against the risk of disability or death, also known as Family Takaful.

 Islamic Sharia Compliant Insurance – Birds Eye Operational Structuring
 Islamic Insurance funds (Tabarru = Premiums or voluntary donations contribution ) are invested in a joint pool created to share risk and provide its members mutual guarantee and protection against it.
The fund is managed by one of its members in exchange for a payment of a fixed fee or alternatively a manager is hired for the job.
The operator manages the funds in the pool, maintains a part of the funds to pay for claims and invests the rest in Shariah-compliant business ventures.
In case a loss is experienced by any member of the pool it is distributed equally amongst all its participants and is made up for from the funds within the pool.
In the event of a profit from business investments, it is distributed among the investors according to their investment ratios.
After the payment of claims, if any, the operator is remunerated for his services from the amount in the pool and the remaining balance is distributed among its members.
 
Prophet Muhammad (PBUH) hadith
Prophet Muhammad noticed a Bedouin leaving his camel without tying it and he asked the Bedouin “Why didn’t you tie down your camel?” The Bedouin answered, “I put my trust in God.” Muhammad replied, “Tie your camel and put your trust in God.”
Conclusion
Insurance is allowed by Islam, however, it should be in line with Sharia Principles.
Please contact Mohamed Ebrahim Insurance Agencies for your Islamic Sharia Compliant insurance needs. Contact ; Ali Ebrahim email aebrahim@acegeoup.co.ke Cell – 0774 337799 or 0777 333 799