Q: If a Muslim needs to claim on their car insurance policy, can they benefit from the entire amount of money, or only that amount which equals premiums paid to date?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: The premiums paid under conventional insurance are paid through an irregular contract according to Sharīʿāh and thus the contract itself must necessarily be rescinded. When an individual makes a claim he is, in essence, merely recovering the premiums paid to that insurance company so far. Thus, he is allowed to recover only the amount he has paid to that insurance company in the form of premiums. Any amount beyond that will be ribā.
And Allah knows best.
Mufti Mohammed Zubair Butt
Chair Al-Qalam Sharia Scholars Panel