Current Legal Issues

    • (15) Insurance Agreement

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 contract [policy].

(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:
  1. Offer by the Insurance Company
  2. Acceptance by the Insured.
  3. 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 guardianship.

(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.