All perfect praise be to Allah, The Lord of The Worlds. May His
blessings and peace be upon our Prophet Mohammad and upon all his family and companions.
The ruling on credit insurance varies according to the nature of the insurance:
If the insurance is commercial, it is prohibited to engage in it. This is because this type of insurance is deemed forbidden according to the majority of scholars and contemporary Islamic jurisprudence councils, as it is based on contracts involving gambling. Allah the Almighty says {what means}:“O ye who believe! Intoxicants and gambling, (dedication of) stones, and (divination by) arrows, are an abomination,- of Satan’s handwork: eschew such (abomination), that ye may prosper.” [Al-Ma'idah/90]
However, if the insurance is Islamic cooperative (takaful), it is permissible to engage in it. This is because it is founded on mutual solidarity, cooperation, charity, and voluntary contributions among the participants in the fund. Allah the Almighty says {what means}: “And cooperate in righteousness and piety.” [Al-Ma'idah/2]. This represents the position of the majority of contemporary jurisprudence councils and fatwa institutions.
In conclusion, there is no prohibition in insuring debts if the insurance is of a cooperative nature. The risk of delayed repayment or default on debts is considered a permissible risk to insure, provided the debt arises from a transaction that is lawful in Sharia. Conversely, credit insurance is not permissible if it is based on commercial insurance. And Allah the Almighty knows best.
