Fatwa ID: 07063

 

Answered by: Maulana Burhaan Rahman

 

Question:

 

If I was to get property insurance where I would pay an insurance company a yearly fee and then in return if my house was to have fire damage, they would then arrange contractors to come and repair/rebuild the property, I would never receive the money into my account. However the insurance company would be compensating me as they would be paying the contractors and getting my property repaired.

 

Also if I was to make a claim I would have to pay an excess fee of anything from £50-£1000 would this contract itself contain riba?

 

Question 2-

 

If the insurance company’s intention was to pay the building company money on behalf of myself. Would that then mean the contract would contain riba?

 

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

 

The definition of Riba comes from the Arabic word (rubow): In Ibn Mandhoor’s Lisaan Al Arab it mentions the literal and technical (Islamic) meaning of the word Riba:

 

زَادَ وَنَمَا. وأَرْبَيْتُه: وَفِي التَّنْزِيلِ الْعَزِيزِ: وَيُرْبِي الصَّدَقاتِ؛ وَمِنْهُ أُخِذَ الربا الرِّبا الحَرام؛ قَالَ اللَّهُ تَعَالَى: وَما آتَيْتُمْ مِنْ ربًا ليربُوا فِي أَمْوالِ النَّاسِ فَلا يَربُوا عِنْدَ اللَّهِ؛ قَالَ أَبو إِسحاق: يَعني بِهِ دَفْعَ الإِنسان الشيءَ ليُعَوَّضَ مَا هُوَ أَكثرُ مِنْهُ

 

(It means) to increase or grow. Arbaytuhu (means) I grew it (or nurtured it). And in the Qur’an: He increases in charity; And from it was taken “forbidden usury”; God, the Most High, said: And whatever you give for interest to increase within the wealth of people will not increase with Allah; Abu Ishaaq says: it means to give something to someone so you get more back in exchange.

 

 

So the conventional definition refers to charged interest. Usury or the practice of charging really high interest rates, has also been used to describe it.

 

According to the majority of Islamic jurists, there is also another type of riba, which describes the simultaneous trade of items with different quantities or qualities. [Understanding Riba in Islamic Finance page 1]

 

 

1) Is property insurance allowed?

 

Property insurance provides financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft—and to a person other than the owner or renter if that person is injured on the property. [GovUK]

 

Unless this type of insurance is mandatory by the government which isn’t in the UK, it would be allowed like car insurance as it’s obligatory to have it in such a case. Allah SWT states:

 

إِنَّ اللّهَ يَأْمُرُكُمْ أَن تُؤدُّواْ الأَمَانَاتِ إِلَى أَهْلِهَا

 

Indeed Allah commands you to deliver the rightful duties to the leader (country/state). [Surah Nisaa’ verse 58]

 

 

Property insurance is a type of riba because when people pay for insurance, the insurance companies pledge to pay them more or less when a specific accident for which the policy has been taken out occurs. And it’s all based on possibility. There are certain situations when property insurance is obligatory by UK law like when a property is on mortgage. Also if one is in dire sincere need to apply for property insurance for whatever reason, you are allowed and Allah the exalted knows each and everyone’s sincerity.

 

The legal maxim of Islamic law mentions:

 

الضرورات تبيح المحظورات

Necessity renders prohibited things permissible.

 

And if there is a situation where the insurance company pays the building company on behalf of you, because you would be connected to the insurance company in the ‘transaction’ albeit being paid on your behalf, the same ruling in 1) would be applied to this situation – question 2).

 

 

 

Only Allah knows best.

Written by Maulana Burhaan Rahman

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham