Answered by Mufti Muhammad ibn Adam al-Kawthari
Question: I understand that the insurance contract generally is unlawful. My question is related to “cover plan” contracts.
The first plan is the road recovery services offered by AA, RAC. A fixed premium is paid per year and any issues related to your car can be fixed by the company on call out. Is it permissible?
The second plan is related to cover taken with a company that says that on paying a fixed amount per year one can call them out to fix an appliance. Is it permissible?
Answer: In the Name of Allah, Most Compassionate, Most Merciful,
To become a member of AA or RAC or any other company for the breakdown of the car is permissible and is not similar to insurance.
The reason that insurance is unlawful has been explained at length in past answers.
The case, however, with car membership is not the same. When one becomes a member, one pays for the service which the company offers him, which is to be at his assistance at any time. The money which is being paid is for the service. This is the reason why the company does not pay for any damages to the car. If you are short of fuel they will bring the fuel for you, but you will have to pay for it. If one does not use their service during the course of the year, then the payment still remains, as one is paying for the service of them being there for you at any time.
And Allah Knows Best
Muhammad ibn Adam al-Kawthari, UK