Is conventional insurance permissible, and what is takaful?

The majority of contemporary scholars and fiqh councils rule that conventional commercial insurance is impermissible because it combines three prohibited elements: excessive uncertainty (gharar), since neither party knows what will be paid or received; gambling (maysir), since the policyholder may pay little and collect much or pay much and collect nothing; and riba, since insurers invest premiums in interest. Islam forbids selling based on gharar and forbids maysir outright. Takaful is the Islamic alternative: participants donate into a mutual pool (on the basis of tabarruʿ, cooperative giving) to compensate whoever is stricken, the fund is invested in halal ways, and it is managed transparently. Obligatory state-mandated coverage may fall under necessity, but voluntary commercial insurance should be avoided where a takaful option exists.

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