What Are the Religious Rulings Concerning Life Insurance, Health Insurance, Insurance — Jurisprudential Answers — Miscellaneous Issues, Vol. 1

Ahmed al-Hasan Response:

Insurance is a permissible contract between one party, usually an insurance company—the insurer—and another party, usually an individual, individuals, or a company—the insured or policyholder. In the contract, the insurer undertakes to pay the insured or his heirs a sum of money when a specified event occurs to a specified insured interest during a specified period, in return for the insured paying a specified amount during a specified period. The following rules apply: (1) The insured must pay the amount due under the contract within the specified period. If he refuses to pay, the insurer may terminate the contract and return half of what the insured has paid, if he has already paid part of the amount due. (2) If the insured delays payment, the insurer may either grant him time or terminate the contract and return half of what the insured has paid, if he has paid part of the amount due. (3) If the insurer stipulates that none of the installments already paid will be returned if the insured breaches the contract or delays payment and the insurer therefore terminates it, the condition is valid. (4) The insurer must fulfill its obligation to compensate the insured when the loss occurs. The contract does not terminate merely because the insurer refuses to pay; rather, the insurer is compelled to pay. (5) From the outset, the insurer must be capable of covering the loss contemplated by the contract. If after the contract it becomes clear that the insurer was incapable from the beginning, the insured has the right to terminate the contract and recover all money paid. The same applies even if the insurer later becomes capable after initially being incapable. (6) If the insurer becomes incapable after initially being capable, the insured has the right to terminate the contract and recover half of what he paid. (7) If the insurer stipulates that it will not return half the money if it later becomes incapable of covering the loss and the insured chooses to terminate the contract, that condition is invalid. (8) If the insured stipulates that all money paid will be returned if the insurer later becomes incapable, the condition is valid.