Paying a Higher Rate in Installments for Car Insurance

Paying a Higher Rate in Installments for Car Insurance


I am planning to buy car insurance on installments, is it allowed in Islam? There will be an element of interest as they charge you more money than usual one off price. Installments are purely for tightness of money.


In the name of Allah, Most Compassionate, Most Merciful,

Firstly, you may be aware that Islamically all prevalent forms of commercial insurance are unlawful, because they entail gambling/chancing (qimar), interest (riba) and/or uncertainty (gharar). The concession given by contemporary scholars to take out car insurance is on the premise that it is a legal requirement in most countries.

Thereafter, it is permitted to purchase car insurance where one pays in installments and as a result the price is increased. This is not considered unlawful interest (riba).

It is permitted to buy any item where the seller has two prices: One price for paying on spot and the other for deferred payment, as long as one of the two options is agreed-upon by both parties; and importantly, once the price is fixed it is not increased due to late payment.

For more details on this, please read the detailed answer given to a similar question, posted previously to the website titled: ‘Mark-UP and Riba’

And Allah knows best

[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK

Question #: 6843
Published: 13/09/2012

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