Is Health Insurance and Pension Permissible in Islam?
Health Insurance (other types of insurance & pensions)
Sheikh Sulaymān Ar-Ruhaili waffaqahullah said (paraphrasing):
Every commercial insurance intended for profit is a type of commercial insurance that is PROHIBITED by Islamic law, as it involves uncertainty and unjust consumption of wealth. For example, a company offering health insurance might require an annual payment of 1,000 riyals a year in exchange for medical coverage. If the person does not fall ill during that year, the company unjustly profits from their payment. Alternatively, if they require treatment worth 50,000 riyals, the company loses that amount. This involves significant uncertainty, as the subject of the contract is unknown and unnecessary. Therefore, car insurance, health insurance, and life insurance, all aimed at generating profit for a company, are considered IMPERMISSIBLE by the majority of contemporary scholars, and this is the correct ruling.
ARE THERE ANY EXCEPTIONS?
Yes, the following cases are exceptions:
Mandatory insurance imposed by the state: If the state requires citizens to have insurance, such as car insurance, driving license insurance, or health insurance, and enforces that those without insurance will not receive treatment, then it is PERMISSIBLE for those obligated by law to obtain such insurance, as it is a matter of necessity. However, the compulsion itself is not deemed permissible.
Employer-provided insurance: If a person is not directly insuring themselves but rather being insured by someone else to secure their rights, this is allowed. For example, an employer is required to provide healthcare for their employees during the contract period. The employer may contract with an insurance company to cover their workers. In this case, the employee is not the one taking out the insurance but is instead the beneficiary, with the right to receive treatment. Therefore, it is permissible for the employee to seek treatment through the insurance, as they are simply claiming their right, not directly engaging in insurance. On the other hand, if the company sets an optional insurance arrangement, in this case it becomes IMPERMISSIBLE for the employee to voluntarily take out an insurance policy.
High treatment costs: If the cost of healthcare in a country is prohibitively high, such that MOST PEOPLE cannot afford treatment without insurance, it MAY be permissible to obtain insurance. An example of this is in Europe, where the cost of medical treatment is extremely high, and many people cannot afford it. In this case, it is permissible, in my view, for a person to participate in insurance with the intention of only receiving treatment equivalent to what they have paid in premiums. If they require treatment beyond what they have paid, they should continue paying premiums until they cover the excess amount. For instance, if someone pays 10,000 riyals in premiums but needs a surgery costing 20,000 riyals, covered by insurance, they should continue paying premiums until they have contributed an amount equal to the total treatment cost. This approach eases the financial burden without unjustly consuming others’ wealth.
As for cooperative insurance, which is designed to provide mutual support among people rather than profit, it is permissible. In this type of arrangement, those who contribute do so not for profit, and those who receive help do not seek to profit either. Instead, the goal is to support one another. For example, in a city where individuals cannot afford healthcare on their own, they might establish a cooperative fund where each member contributes 10 riyals monthly, managed by a trusted group. The funds may be invested to grow the capital, and when someone needs treatment, they receive support from this fund. This is cooperative insurance, which is not aimed at profit but at providing assistance. It is permissible, with no objections.
In my view, what is known as state-organised pension funds for government employees, or social security funds organised for companies, fall under the category of cooperation rather than profit-seeking. Their purpose is to provide assistance in cases of disability or retirement. These arrangements are a form of cooperation and are permissible. It is not required that a person receive exactly what they have paid in, as they might receive more or less, depending on the circumstances, since this is a cooperative effort rather than a commercial transaction or business venture.