Is AA or RAC car membership permissible or is it like insurance?
To become a member of the AA or RAC or any other company for the breakdown of the car is permissible and is not similar to insurance.
The reason why Insurance is unlawful (haram), is because it is based upon interest and gambling. Gambling, because the premiums are paid for certain, where as the return is uncertain. You may loose all the premiums you paid or may receive in return more than what you paid. This is known as gambling. There is also interest involved as money is being exchanged here for money, and one party pays less and receives more in return.
This is the reason why the great contemporary scholars have declared all types of insurances to be unlawful (haram), unless when one is compelled by the Government.
The Islamic Fiqh Academy, the headquarters of which is in Jeddah, and which consists of scholars from all around the globe researched this issue. The meeting was attended by 150 scholars from 45 Islamic Countries including my respected teacher Shaykh Justice Mufti Muhammad Taqi Usmani (may Allah preserve him), and they unanimously declared all types of insurances to be unlawful.
The case, however with car membership is not the same. When one becomes a member, one pays for the service which the company offers him, which is to be at his assistance at any time. The money which is being paid is for the service. This is the reason why the Company does not pay for any damages to the car. If you are short of fuel, they will bring the fuel for you, but you will have to pay for it. If one does not use their service during the course of the year, then the payment will still remain as one is paying for the service of them being there for you at any time.
This is the distinction between insurance and car membership. I hope I have been able to answer your query.
And Allah Knows Best
[Mufti] Muhammad ibn Adam
Leicester , UK