Current Legal Issues
- BANKING AND FINANCIAL SERVICE
Insurance is a contract in which the Insured undertakes to pay the
Insurer a specified sum of money [premium]. Such premium could be spread
out an monthly basis or paid for the whole year. In return the Insurer
undertakes to pay the Insured or the beneficiary, in whose favour the
insurance policy was made, a sum of money, regular income, or any other
financial benefit, in the event of accident or loss mentioned in the
- (32) Hereunder are some types of insurance:
Life assurance: against death and some other dangers, such as illness
and the like.
Insurance for property, cars, aeroplanes, ships, etc. against fire,
theft, and sinking, etc..
There are other types of insurance also but it is not necessary to
mention them here because the ruling of the shari’a law that
applies to the aforesaid kinds of insurance also apply to them.
- (33) Insurance contract comprises the following components:
- Offer by the Insurance Company
- Acceptance by the Insured.
- Agreeing the period of the cover - commencement and termination.
- (34) It is necessary that the danger leading to the damage be
specified, e.g. sinking, fire, theft, illness, death, etc. The
amount of instalments [premiums] payable by the policy holder
(insured), whether monthly or yearly.
- (35) It is conditional that the two parties of the insurance
contract be adults, sane, have free choice and intent, and must not
be under guardianship for being in-competent or bankrupt. The
contract would, therefore, not be in order if one of the parties is
either minor, insane, weak, one under duress, or one under
- (36) Insurance contract is a binding one and it cannot be
annulled except with the consent of the parties.
Of course, if the contract stipulates the right of cancellation to
either party (the Insured and the Insurer) or both of them, the
annulment is in order according to the conditions.
- (37) If the Insurer defaults, the Insured has the right to
force him to fulfil the contract, even with having recourse to the Marji’
or any other [authority]. He also has the right to annul the
contract and retrieve the insurance premium.
- (38) When it is decided that the insurance premium be paid by
instalments, and the Insured fails to pay it, whether in quantity or
manner, it is not obligatory on the Insurer to pay compensation for
the loss or damage, as is undertaken. Similarly, the Insured has no
right to claim back any instalments paid.
- (39) The validity of insurance contract is not dependant on a
specified period. Rather, any duration mutually agreed between the
two parties - the Insured and the Insurer - is in order.
- (40) A group of people agreed to establish a company, that was
jointly financed by them. In the agreement that set up the company,
each one of them made it conditional on the others, that in the
event of anyone of them sustaining a loss to his person or property,
such as car, house, the company will compensate him for it out of
its capital or profits obligatory to act upon the condition as long
as the agreement is in force.