This is from the religion column of Pakistanlink

There appears to be some differences on insurance by different scholars. Here is what one person, Muzzamil Siddiqi says. Please investigate it further and decide for yourself what you wish to do.

Q 1. I was wondering if any one would be able to give me the Islamic perspective on Disability Insurance.

(Ahmer)

A.1 I have written on the subject of insurance before. The word insurance is a confusing and misleading word. We believe that no human being can insure anyone and anything. Insurance companies can neither insure your health from sickness, nor your property from damage, nor you from disability and death . Only Allah has the power to insure. However, apart from the terminology, the principle of mutual cooperation in helping each other in case of death,accident or sickness etc. is not wrong. There is nothing un-Islamic about it. As Muslims we may use the word "takaful" (mutual responsibility) for it. It was Muslims who first introduced this principle. Muslim businessmen in Spain used to make long journeys via sea for trade purposes; and it were they who first introduced this principle. They used to collect some money from each merchant and used to compensate those among them who incurred any loss of ship or merchandise in their sea voyages. European businessmen learnt and adopted this practice from Muslims. While Muslims forgot about it, it was the Europeans who developed it in the most sophisticated and diverse forms. Some Muslim scholars consider insurance forbidden on the assumption that it involves a kind of gambling and it goes against the principle of taqdir in Islam. But there are other scholars who have equally strongly argued that insurance is very different from gambling. Dr. Nejatullah Siddiqi in his book on Insurance in Islamic Economy has pointed out that gambling upsets the normal system based on work and reward and is inimical to equitable distribution of income and wealth, whereas insurance protects the disruption of the system by accidents and events beyond human control. A gambler takes risks in order to make more money, but the insurer's basic objective is to protect his/her assets and interests. The Takaful (or insurance as the word has become common now a days) in the case of Disability and/or loss of life is not against the principle of taqdir, because no one is claiming that this or that company will protect life, health, or safety. The insurance companies only promise that in case of death, sickness or accident or disability they will provide certain compensation to the individual or his/her family within certain limits that the parties have agreed upon. The insurance companies utilize the law of probability and causality. They estimate how many people in a large population get involved in accidents. On the basis of the scientific studies of statistics etc. they collect a certain premium from every person and distribute it among those who incur the loss. For these reasons, many Muslim scholars have allowed insurance and they also do not see anything wrong in life or disability insurance. I am inclined to accept this position and consider health, home, auto, disability and even "life" insurance permissible in Islam.

We, however, must keep in mind that most of the insurance organizations today are involved in riba and other Islamically prohibited transactions. It is for this reason important that Muslims have their own insurance companies based on Islamic economic principles. This was also the opinion of Maulana Mawdudi who once said that insurance can be re-organized under Islamic principles so that it becomes free from all prohibited practices. In the absence of Halal Islamic insurance companies, Muslims are allowed to purchase insurance from other insurance companies because as a minority in non-Islamic states Muslims must protect themselves, their properties and businesses, and they must make provisions for their families. A prominent group of 'Ulama held a conference in Nadwatul 'Ulama in Lucknow, India in the early 70's and had suggested that Muslims should take benefit of insurance.