The basic idea behind life insurance is sharing of risk. Let us say that there is a one in a hundred chance of something happening to you during a specified period of time and it will cost you 10,000 dollars if it happens. Insurance is based upon the idea that if you gather one hundred people, there is now a very good chance if everyone contributes 100 dollars each, the afflicted person can come out of the loss. If the number of contributors increases to 100,000 or more, the money will be pooled in a large amount. The number of afflicted will be less and everyone will be guaranteed of the help in case anyone meets any misfortune.

There are chances of cheating too. If you know that a certain things will definitely befall you during that period, then you would be cheating other people. And similarly, if you do something deliberately, this too is cheating. This is very common due to the human nature, not only in the insurance field but in every faculty of life. Even in some religious bodies, people conspire to get the misappropriate advantage of opportunities. So it is not appropriate to blame life insurance alone.
It is this element of paying money towards something you do not know and could take place anytime. This is that uncertainty which has made modern insurance problematic for scholars of Islamic Economics.
There are two types of insurance:
1. Life insurance or Assurance
2. General insurance (everything which is non-life)

In common usage, both are called insurance but, technically, the life insurance is called “assurance”, and General Insurance is called “insurance”.
In this book, the word insurance is used for both insurances, life as well as General in order not to confuse the readers.
Life itself is an asset, and everything related to it is an asset too.
For example, a singer’s livelihood depends upon his voice. A footballer’s or sportsman’s life depends upon his feet. A craftsman’s earning depends upon his hands. Therefore, the voice, feet, hands, etc. too are insurable. These are called “insurable interests”. Insuring any non-insurable interest is gambling as the wagerer tries to earn more than the actual value of the asset.