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I've read fatwas about how insurance generally is haraam, however, if you live in countries where certain insurances are legally required, that type of insurance is not haraam. For example, car insurance is required in many countries.

My question is, if you are forced to get car insurance, and you end up in a genuine accident, i.e. not an accident you do or cause on purpose, is it okay Islamically to claim from the insurance you were forced to get in the first place?

Or, is it only okay to get forced insurance, but haraam to claim genuine claims on this forced insurance?

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up vote 3 down vote accepted

Insofar as insurance is considered a form of either riba or gambling, proceeds therefrom should be treated as unlawful, as one would the proceeds from any such sources. Shaykh Muhammad ibn Adam al-Kawthari describes the Hanafi position on the matter thus:

The ruling on money gained from playing the lottery is similar to that of all other unlawfully acquired money, in that it should be given in charity to poor people without the intention of receiving reward

This is presuming that the ill-gotten gains cannot reasonably be returned to the rightful owners, which would be preferable.

When dealing with forced vehicle insurance (and to an extent, any form of insurance), there are a few extra considerations, which I will summarise thus:

  1. If you are not claiming more money than you have already contributed to your insurance company, then it can be argued that you are not profiting from gambling, rather you are merely recovering your own money which you were forced to pay out. In this case, the opinions of Shuyukh Muhammad Salih al-Munajid and Muhammad ibn Adam al-Kawthari is that there is nothing wrong with accepting the money.

  2. Any claim amount exceeding the amounts already paid as premiums would be considered unlawful and should be disposed of as mentioned above (e.g. donated to charity). However, my own personal opinion is that any exceeds can be kept aside for paying off future insurance premiums to the same company, as this would be a reasonable method of returning the money to its rightful owners. If circumstances change such that you are no longer paying these insurance premiums, any remaining exceeds can then be disposed of accordingly.

  3. However, there may be situations where the other party is clearly at fault, and the claim is paid out by either the offending party or his own insurance company. In this case, the opinion of Mufti Taqi Usmani is that you are entitled to be reimbursed for the damages in full, regardless of whether the money comes directly from the other party (preferable) or from his insurance company. This is completely independent of how much you may (or may not) have contributed to your own insurance company.

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+1 great answer mashaAllah. –  Ansari Dec 20 '12 at 16:15
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