Answer: This type of insurance is impermissible. Motor-vehicle insurance in the form you have described—paying a fixed sum to the company in return for its pledge to repair your car should anything, great or small, happen to it—is unlawful, because it involves speculation and risk, as well as the unlawful consumption of wealth. Therefore such insurance is forbidden.

A person is required to rely upon Allah, and when something befalls him by Allah’s divine decree he must remain patient and shoulder whatever expenses and fines ensue, paying them from his own wealth rather than from that of an insurance company.

Allah, Exalted is He, is the One Who brings provision and assists with such matters, without a person having to resort to insurance companies with all the risk and the unjust appropriation of other people’s money that they entail.

Moreover, when car owners insure their vehicles and know that the company will pay any penalties, this breeds carelessness and reckless driving, which may in turn harm people and their property. If a driver knows that the company will bear the consequences of his wrongdoing, he becomes lax, whereas if he realises that he alone will be held responsible, he exercises greater caution. Thus these insurance companies foster recklessness and indifference among drivers.