Can I pay my car insurances in monthly instalments or do I have to pay it yearly?

In the name of Allah, the most Beneficent, the most Merciful.

Answer

Briefly, it should be understood that all types of insurances are impermissible for three reasons:

1. Interest/ Usury
2. There is an element of deception
3. Qimar (gambling)

The reason for it being interest is that insurance is the sale of money for money of a greater or lesser amount with a delay in one of the payments. Insurance companies take people’s money and promises to pay them more or less when an accident happens. This is riba, which is haram in Islam.

(Hujjatullahi Baaligah p.98 v.2)

In the Holy Quran Allah (SWA) has said:

“Allah has permitted transactions and has forbidden riba” (Surah Al Baqarah v.275)

The Prophet of Allah (Sallallahu Alahi Wasalam) has cursed the person who takes interest, who gives interest and who writes it and who witnesses it.”

(Mishkaatul-Masabeeh p.244 v.1)

“To take dirham of interest knowingly is worse than committing adultery 36 times.” (Mishkaatul-Masabeeh p.246 v.1)

Also in insurance policies there is an element of deception, which Islamicaly, is termed as garar.

1. The amount to be paid is unknown
2. The time it will occur is also unknown.

The Prophet of Allah (Sallallahu Alahi Wasalam) has forbidden deception and uncertainty in transactions. (Sunan Tirmizi p.233 v.1)

All forms of insurances are based on uncertainty. The reason why you are being insured must have a possibility of happening or not happening. For example, when an accident happens and the extent of the damage caused.

Finally, the third reason for it being impermissible is because there is an element of qimar (chancing). Insurance policies require payment of money, thereafter if the following mishaps were to occur, a payment will be made. This is pure gambling, thus forbidden in Islam.

The definition of Gambling as stated in Raddul Muhtar;

“Gambling is a dealing in which there is a chance of gain and loss. (P577 V.9)

In regards to your question, whether it is permissible to pay your car insurance monthly instead of annually depends solely whether interest (riba) is being involved. If paying your car insurance monthly equals to the exact amount you would have paid annually then it is allowed. If however, your insurance provider adds interest or charges extra if you pay monthly exceeding the annual total then it is forbidden for you to pay monthly.

Only Allah Knows Best

Mohammed Tosir Miah

Darul Ifta Birmingham.