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New Kind Of Insurance (Baltimore Equitable Insurance)
There is a different type of new home insurance that I came across. Would you be able to guide be what Islamic ruling would apply in this scenario:
This home owner insurance collects lump sum amount for I think 15 year’s premium. However, they refund the total premium when we end/cancel the policy. So it seems that they use interest from lump sum amount to mitigate risks.
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2 Replies
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New Kind Of Insurance (Baltimore Equitable Insurance)
updated 1 year, 8 months ago
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Inherently there is nothing wrong in the whole concept of Insurance. Activity of Insurance is primarily a permissible activity. Insurance is a sort of contract for mutual help in which people pay a fixed amount in installments. The purpose is that if any of them is inflicted with losses relating to their persons or their wealth, they are compensated from this pooled money in a prescribed manner. Insurance involves use of complex actuarial estimates on happening / non-happening of insurance triggering events and frequency of such happenings which give an estimate on how much will be expended on insurance claims.
Instances where primary activity of an organization is Halal but it also earns interest through term deposits in a bank or other investements in banks as part of its financial management plan, this would not render the primary activity prohibited unless the insurance company explicitly states or mentions that insurance claims would be paid out of interest income solely.
Please refer to the following responses of Ghamidi Sahab:
Discussion 62055 • Reply 62071
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JazakAllah for your response. Insurer terms and conditions seems very tempting where they will refund all the premiums paid over the life of the policy and reduce the deductible to zero over the years too. At this point, it seems that I would be consuming interest only to get coverage. My heart doesn’t want to settle and I will pass on that.
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