We have already discussed about the Quranic verses which have forbidden Riba/usury. Here I have mentioned about the ahadith in which our Dear Prophet Mohammad (saw) has enlightened us about this matter.
Jabir sated, ‘Prophet Mohammad (saw) cursed the taker of interest, its giver, its recorder and its two witnesses. They are all alike’. (Muslim)
Through this hadith it becomes clear that all those who are involved in Riba are wrongdoers and the fact that Riba is a grave sin becomes evident by the fact that Prophet Mohammad (saw) has cursed those who are involved in it.
Ubaadah Ibn-al-Samit narrated that Prophet Mohammad (saw) said, ‘Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt (should be) the same amount for the same amount, equal for equal, hand for hand’.
This hadith states that monetary exchange should be done hand to hand. In case the money is of the same type than it should be in equal amounts. If these conditions are not met then it means that the traders have are involved in Riba. If we observe the insurance contract we will find that it involves two types of Riba, i.e. Riba-al-fadhl (interest through increased payment) as well as Riba-al-nasee’a (interest by means of a delay in payment which is needed to be hand-to-hand).
It is quite doubtful for the insured person to ever get the same amount from the insurance company, (directly or indirectly), as much he had paid to them through premiums. If the policy holder receives a larger amount from the insurance company than what he had paid through premiums then it will be tantamount to Riba-al- Fadhl. Since the amount can hardly be the same and the money is not exchanged hand-to-hand so both the parties commit the sin of Riba-al-Nasee’a.
Keep Me In Your Prayers.