Insurance Claims

By Mufti Taqi Usmani
Posted: 27 Muharram 1421, 21 April 2001

Q.) These questions came to light after discussing them with ulema, who advise me to put forward these questions to Mufti Taqi Usmani sahib and inform them of the view of our beloved Mufti Sahib.

1. In England to have car insurance is compulsory. Talking to ulema, they state that third party only is allowed. However discussing this with my friend, who is also an aalim, we wanted to know what if full comprehensive insurance is cheaper than third party insurance e.g. full comprehensive was 600.00 and third party was 1000.00, which happens sometimes. So even in this case would one have to buy third party Insurance or not?

2. When a person has an accident with another car, the insurance company of the other car owner pays a person out fully. The money that they pay is the market value of the car and not the actual value. For example I recently had an accident, the insurance company of the other person paid me out 2100.00 whereas I bought my car for the price of 1600.00. So would the extra money received in this case be jaa'iz (permissible) or haraam? Also I have heard that you cannot claim more than the amount you have paid to the insurance company. In case if the other person is not insured then my own company will pay me out. Would this money also be jaaiz? [Sajid Khan]

A.) Although all of the conventional schemes of insurance violate certain injunction of Shariah and are therefore not permissible. However, if a Muslim is obligated by the law to have an insurance cover, it is permissible for him to have insurance up to the minimum level required by law. Since the third party insurance is obligatory by the law in most of the countries this has been allowed by the Shariah scholars but if full comprehensive insurance is cheaper than the third party insurance and it can fulfill the requirement of law and after that one does not need to enter into a third party insurance then it will be permissible to have full comprehensive insurance to meet the requirement of law. But two points must be kept in mind in this respect: First, merely on the ground that the full comprehensive insurance is cheaper, both kinds of insurance cannot be held simultaneously if the law does not require so. Second, in case the full comprehensive insurance is undertaken to meet legal requirement and the insured person is offered a compensation only to the extent of the total premium he paid to that company so far (it may include the premium to the same company with regard to some other items also) and the rest of the compensation must be given in charity.

If the car of a person is destroyed by a wrongful act of another person the owner of the car is entitled to receive the full market value of the car and not only the original cost of the car, but this market price is the liability of the person whose wrongful act caused the accident. Therefore, it is advisable that the aggrieved person receives the compensation from the owner of the car and not from the insurance company. But if it is not possible for some legal procedures in a country and the amount of compensation is paid by the insurance company directly to the aggrieved person and not to the insured person, the aggrieved person can also avail of this compensation.