Introduction
Los Angeles is going through one of its worst fires ever. The fire is very big and spreading quickly, destroying homes, buildings, and nature. Firefighters are working hard to control it, but it’s a tough job because of dry weather, wind, and heat. Many people have had to leave their homes to stay safe. It’s a very serious situation.
The exact number of billions of dollars in damages, lives lost, people displaced, and magnificent mansions reduced to ashes are details you can learn from TV channels and the internet, so there’s no need to elaborate here. Besides, the fire’s intensity is so great that these statistics are changing every moment. The state of Los Angeles now resembles a city hit by an atomic bomb. As expected, a specific segment of our society (not the entire society) is adamant that the Los Angeles fire is divine punishment. They claim that because the U.S. supports Israel, and Israel has broken all records of brutality in Gaza, the divine, silent whip has retaliated by punishing Los Angeles.
It’s regretful to say, but this logic has never been valid, nor is it now, so it doesn’t require a rebuttal. Even if we hypothetically accept this argument, it still wouldn’t significantly affect the wealthy of Los Angeles. Their millions of dollars’ worth of fortress-like homes will be compensated by insurance companies, while the burden will fall on the poor, who are in the minority in this region. How is this a punishment, where the rich escape unscathed while the poor bear the brunt?
Today’s discussion is not about whether the Los Angeles fire is retribution; instead, it focuses on whether insurance is the best solution for such unforeseen calamities. If not, which verse of the Quran or Hadith prohibits it? To find answers to these questions, I downloaded a few fatwas from the internet, one of which I’ll share here as a sample.
“The dealings of contemporary insurance companies are akin to the operations of banks, involving usury (riba), differing only in form. Furthermore, insurance contains both usury and gambling, both of which are unequivocally prohibited in Islam, as established by clear Quranic texts. No contextual justification can render these prohibitions lawful.”
“In insurance, usury occurs when compensation exceeds the amount paid, and gambling occurs when no claim arises, and the premium is forfeited to the company. There is also ambiguity and deceit in insurance contracts, which Sharia deems invalid. Therefore, participating in insurance as a client or an agent is unlawful.”
Interestingly, while declaring insurance haram, the same fatwas deem Takaful (Islamic insurance) as permissible.
The primary premise in these fatwas is that insurance involves usury and gambling, making it impermissible. However, this assumption is incorrect. Imagine a village with 1,000 houses, where annual floods destroy a few homes. The villagers decide to pool a fixed amount from their monthly income, managed by the village elder, to create a fund. This fund, carefully accounted for, will help rebuild any houses destroyed by floods. This fund is essentially insurance, and the village elder is like the insurance company. There’s no gambling or usury involved in this system.
Another argument in these fatwas is that insurance companies pay an “excess amount” in case of a claim, which is deemed unlawful. This argument is also flawed. For instance, if you insure your car today for 5 million rupees, you will receive the equivalent value in case of theft or damage—provided you agreed to this in the contract. Otherwise, depreciation will be deducted before compensation is paid.
Now let’s address Takaful
The logic used to justify Takaful is identical to the rationale behind conventional insurance, just as Islamic banking permits interest by labeling it as profit. Islamic banks exploit their customers under the guise of Sharia compliance. while business banks had been providing 20% interest, Islamic banks provided only 12% “profit,” but their automobile loans had the identical hobby price of 23-24% as business banks. therefore, Islamic banks’ profits have constantly handed the ones of conventional banks, making their proprietors even wealthier. While researching this, I couldn’t find any fatwas against such practices, perhaps because the fatwa issuers sit on these banks’ boards.
Today, I’ve highlighted the virtues of insurance, but here’s a disclaimer. Life insurance globally helps support families financially in case of the breadwinner’s untimely death. This system is especially beneficial in poor countries where families are left destitute after a death. Unfortunately, in Pakistan, many insurance companies—especially those offering life insurance or false promises of a prosperous future—deceive customers and extract money. Avoid such companies. However, do insure your personal and business assets to protect against losses. Ensure your insurance documents are stored safely; otherwise, in the event of a fire, the policy itself might burn.
Takaful, frequently defined
Takaful, frequently defined as Islamic coverage, has won recognition as a Sharia-compliant opportunity to conventional insurance. but, many critics argue that the fundamental standards in the back of Takaful aren’t anyone of a type from conventional insurance, with the distinction being more about terminology than actual practice.this text delves into the mechanics of Takaful, its similarities to standard insurance, and the wider implications of Islamic banking on financial clients.
The good judgment behind Takaful and traditional coverage
The concept of Takaful is primarily based definitely totally on mutual cooperation and shared responsibility, in which people contribute to a common pool to assist people who undergo losses.whilst this cooperative model appears first rate from traditional insurance, the underlying monetary mechanisms remain largely the identical. Critics argue that just as Islamic banking relabels hobby (riba) as profit to conform with Sharia law, Takaful follows a similar pattern by way of supplying itself as a religiously suitable alternative to coverage while operating beneath similar ideas.
Islamic Banking: A earnings-orientated machine
Islamic banking has often been promoted as an ethical and fairer monetary device. but, in exercise, it’s been located that those banks have a tendency to take advantage of their clients below the pretense of Sharia compliance. A hanging example is the disparity in profit prices among Islamic and conventional banks. whilst industrial banks provided 20% interest on deposits, Islamic banks provided most effective 12% as “income,” but they imposed comparable hobby fees (23-24%) on car financing as traditional banks.
Notwithstanding their claim of being interest-free, Islamic banks have continuously pronounced better profits than traditional banks. This raises questions on their ethical integrity and whether or not they definitely observe Islamic monetary principles or merely rebrand traditional banking practices to enchantment to religiously inclined customers. Furthermore, many spiritual scholars who problem fatwas in support of these establishments are often located serving on the boards of these banks, leading to concerns about conflicts of hobby.
The role and blessings of coverage
Coverage performs a essential position in offering economic safety to individuals, households, and businesses. existence insurance, especially, guarantees that families are not left destitute within the unfortunate occasion of the breadwinner’s loss of life. this is particularly crucial in developing countries like Pakistan, in which the absence of social protection nets leaves households vulnerable to monetary wreck.
whilst the global coverage enterprise presents a protection internet for hundreds of thousands, Pakistan’s coverage area has frequently been marred by means of misleading practices. Many life coverage businesses promise unrealistic returns and financial prosperity, leading unsuspecting clients into deceptive schemes. consequently, humans lose their hard-earned money to fraudulent groups that fail to honor their commitments. purchasers must stay careful and conduct thorough research earlier than making an investment in existence coverage rules.
The importance of Insuring non-public and commercial enterprise assets
While skepticism exists concerning lifestyles coverage, insuring personal and enterprise property stays a smart decision. organizations face risks which include hearth, robbery, and herbal screw ups, and insurance serves as a essential chance control tool to mitigate economic losses.
To ensure clean claims processing, policyholders need to defend their insurance files in a at ease area. A commonplace yet avoidable mistake is storing insurance regulations in risky locations where they can be destroyed in an twist of fate, which include a hearth. with out right documentation, policyholders may battle to say repayment, rendering their insurance regulations useless when wished the maximum.
Takaful and Islamic banking, despite their Sharia-compliant branding, frequently feature siilarly to their traditional counterparts. The economic enterprise continues to conform, and even as insurance remains a important device for hazard management, customers must workout warning whilst deciding on companies. via staying knowledgeable and making well-researched monetary choices, individuals can guard their belongings and make certain economic security for themselves and their households