Islamic Car Insurance

Islamic car insurance covers Muslims without violating their religious principles. Islamic car insurance uses general funds to eliminate the uncertainty of typical car insurance.

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UPDATED: May 4, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: May 4, 2022Fact Checked

Here's what you need to know...

  • Islamic car insurance provides coverage in the same way other insurance companies do
  • Payments on Islamic car insurance are placed into a general fund which eliminates the uncertainty factor
  • Always choose an ethical insurance provider that has a good reputation and financial integrity

Islamic car insurance is available for Muslims to get the financial protection they need while still being in compliance with religious laws and principles.

The overall coverage plan is similar to a standard insurance plan, but there are differences as well.

Learn the specifics of buying this type of coverage, how the funds are collected, and how to identify insurance providers that uphold your ethical standards.

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Buying Coverage


A person who is interested in arranging for Islamic car insurance should find a company that serves this specialty market.

When one of these companies has been located, the customer can arrange for coverage in the same way as any other customer.

He can ask for a quote for coverage, and the insurer would gather some information about the customer before providing pricing information.

Once the customer makes a decision to buy a policy, he would pay a premium to the insurance company.

The amount payable is determined based on the customer’s level of risk and the likelihood that he or she would make a claim on the policy.

The types of losses covered under the policy and the start and end dates for the coverage are listed in the policy language.

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Funds Collected

The money paid in premiums is invested in activities that are permitted under Islamic law. No interest is earned on the money paid by policyholders.

Muslims are not permitted to gamble, and the uncertainty associated with placing money in stocks or mutual funds is considered gambling.

The funds are managed by an agent who takes charge of marketing and administration functions. The agent is paid a fee for services rendered.

If the fund is considered over-funded at any point, this amount is refunded to eligible policyholders in the form of a discount on their next year’s premium payments.

This amount is calculated in addition to any non-claim discounts they may be entitled to.

The structure of an Islamic car insurance plan is different from a standard one.

In a standard policy, the policyholder pays a premium and in return, the car insurance company assumes the risks associated with the policyholder suffering a loss.

The way the contract is written, one of the parties will experience a loss, either the policyholder or the insurance provider. Either way, the contract has an element of uncertainty attached to it.

Under the Islam car insurance system, any risk involved with the contract is shared equally by both parties. As a result, the undesired elements of uncertainty and gambling no longer apply to the contract.

The amount of money contained in the fund that all policyholders contribute to compensate any of them for losses they may incur.

Ethical Companies

All car insurance customers, whether they are Muslim or not, should carefully consider their options for car insurance.

Keep these tips in mind:

  • The company you choose for your car insurance needs should be one that has been in business for a number of years and that has a history of paying legitimate claims in a timely manner.
  • The insurance company should also have a substantial reserve at its disposal so that it can pay out on any claims made by its policyholders.

Before choosing any car insurance company, take the time to check out its financial rating with Standard & Poor’s or Moody’s to make sure that it is considered a healthy commercial enterprise.

Choosing a company with an A+ or A rating means that it can meet its financial obligations.

The Islamic car insurance system is based on principles of mutual trust and respect. The system has eliminated the element of risk between a policyholder and a car insurance company in a more traditional business relationship.

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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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