Is there anything like third-party insurance in Islaam?
In normal circumstances if the situation is such where the law of the country or a person’s company/employer does not bind him to take out such a policy; rather he takes it out on his own accord, then the jurists have classified such an act as impermissible and an open invitation for the wrath of Allah Ta’ala because insurance consists of the elements of interest and gambling.
However, in the case where a person is subjugated and forced to be part of a vehicle insurance policy or any other form of insurance (for example the law of the country enforces him to do so), then in such a situation the Fuqaha have given leeway to take out such policies.
Thus, if due to compulsion from the government, a person takes out an insurance policy on his motor vehicle using his own funds, then he will only be allowed to derive benefit in accordance with the proportion of money that he has invested in the policy. In other words, in the case of an accident, he can recoup and derive benefit up to the amount of premiums that he has injected into the insurance policy. Whatever excess money is received (over and above the premiums invested), will be disposed of to the poor without the intention of reward.
On the other hand, if there is no compulsion from the government to insure the vehicle (such as here in South Africa), then it will not even be permissible to take out an insurance policy.
If by third party insurance, you mean opposite party insurance; i.e. taking out insurance to cover damages that one causes to the opposite party’s vehicle then the same rule will apply, that if it is a voluntary insurance, it will be impermissible and if it is enforced by law, then it will be permissible to take out the policy (but, as mentioned above, one can derive benefit to the extent of one’s premiums that were paid in).
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.
اسلام اور جدید معاشی مسائل ج ۳ ص ۳۱۰