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24 July 2017 CE | 01 Dhul-Qadah 1438 AH
Explanation below

Hadith Explanation

Insurance has Gharar

Abu Hurairah (radi Allahu anhu) narrated: “The Messenger of Allah (sal Allahu alaihi wa sallam) prohibited sales of ‘whatever a pebble thrown by the seller hits,’ and sales in which there is chance or risk (Gharar).” [Sahih Muslim]

“Gharar is chance or risk, meaning it is not known whether it will come to be or not, such as selling fish in the water or birds on the wing. It includes transactions of unknown things, the particulars of which are not fully comprehended by the buyer and seller.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

“There are certain types of sales and transactions prohibited in Islam. Insurance is one of these. In addition to the fact that insurance is usurious (involves Riba), buying and selling insurance policies is also unlawful because of the Prophet’s prohibition of sales in which there is Gharar.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

“Urging the permissibility of insurance, one Muslim modernist has written that the very precise statistical data possessed by insurance companies concerning the probabilities of various eventualities makes what they are selling determinately known (Ma’lum). This argument fails when one realizes that statistical data from a group of events yields probability figures that, properly speaking, are a description of the group as a whole, and are only analogically applied to the individual events within it. When generalized to similar groups of events in the future, such probabilities yield commercially useful knowledge about the likelihood of a particular outcome for these future groups. But they cannot and do not tell what the outcome will be for any particular member of the group, in this case the particular insurance policy. Thus, a “17% probability” that circumstances will enable one to collect such and such an amount on a policy is a mere description of the whole group of previous policy holders in similar circumstances, which does not tell whether one will collect the amount or not. One may collect a certain amount or may not collect it, which is precisely the Gharar that is unlawful.” [Reliance of the Traveller by Ahmad ibn Naqib Al-Misri]

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