|Why is conventional insurance not permissible in Islam?|
Conventional insurance contains elements contradictory to Islamic Shari’ah.
The insurance contract contains uncertainty due to:
Any form of contract which is lopsided in favour of one party at the expense and unjust loss to the other is classified as Gharar.
When a claim is not made the insurance company may acquire all the profits whilst the participant may not obtain any profit whatsoever. The loss of premiums on cancellation of a life insurance policy by the policyholder, or the "double standard" condition of charging a customary short period in general insurance, whilst only a proportional refund is made if the insurance company terminates the cover is also considered as unjust.
When a life insurance policyholder dies after only paying part of the premium his dependants receive a certain some of money which the policyholder has not been informed of and has no knowledge as to how and from where it has been derived.