Short answer
Conventional insurance taken by choice is not permitted in the mainstream Hanafi view, because it combines riba, excessive uncertainty (gharar) and a gamble-like exchange. Insurance the law requires, and cover forced on you by an employer, landlord or lender, is allowed. Takaful is the halal alternative, and a minority of scholars allow conventional insurance more widely.
Voluntary conventional insurance is not permitted. Insurance that is legally compulsory or a binding condition of a job, lease or loan may be taken, and the sin of the contract is not on you. Many Hanafi muftis also permit health insurance where medical costs make it a real need.
The four schools agree on this.
Explanation
In conventional insurance you pay premiums in return for the company's promise to pay out if something happens. You may pay for years and receive nothing, or pay a little and receive a fortune. Scholars find three problems: gharar (excessive uncertainty about what you get), maysir (a gamble-like exchange where one side's gain is the other's loss) and riba (money exchanged for unequal money, with premiums invested in interest-bearing bonds).
Cases where insurance is allowed:
- Cover the law requires, such as minimum car insurance. See Is car insurance haram?
- Cover your employer provides as part of the job, or that a landlord or lender makes a condition.
- Health insurance where care is unaffordable without it, as in the US, where one hospital stay can cost more than a family could pay. Many Hanafi muftis allow it because of need, and employer cover is treated even more lightly.
Where a takaful product is available, it is the better choice. See What is takaful?.
A minority of scholars, such as the Syrian jurist Mustafa al-Zarqa, argued that insurance is a lawful way to share risk and permitted it. Most fatwa councils, including the International Islamic Fiqh Academy, reject commercial insurance and accept cooperative takaful. Contemporary scholars of all four schools largely agree with that conclusion. For life insurance and for claims under a specific policy, ask a mufti.
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Maaida 5:90
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
Gambling is forbidden, and insurance shares some of its features.
Quran, Surah An-Nisaa 4:29
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَٰطِلِ إِلَّآ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٍۢ مِّنكُمْ ۚ وَلَا تَقْتُلُوٓا۟ أَنفُسَكُمْ ۚ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيمًۭا ﴿٢٩﴾
O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent. And do not kill yourselves [or one another]. Indeed, Allah is to you ever Merciful.
Wealth must change hands through fair, known exchange.
Sahih Muslim 1513
Sahih... نهى رسول الله صلى الله عليه وسلم عن بيع الحصاة وعن بيع الغرر ...
"The Messenger of Allah forbade the pebble sale and sales involving gharar (excessive uncertainty)."
Contracts built on excessive uncertainty are forbidden.
Where the ruling is recorded
- Radd al-Muhtar (Ibn Abidin), Kitab al-Jihad, Bab al-Musta'min, on sawkara. Ibn Abidin's discussion of marine insurance, the earliest Hanafi treatment of insurance.
- Resolutions of the International Islamic Fiqh Academy, Resolution on insurance and reinsurance. Commercial insurance is impermissible and cooperative insurance is the alternative.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.