Short answer
No, not the cover the law requires. In the US, the UK and the UAE you must carry at least liability or third-party insurance to drive, so a Muslim may buy it. Extra optional cover, such as comprehensive, is avoided in the mainstream Hanafi view unless a car loan or lease requires it or it is takaful.
Legally required car insurance is permitted because of compulsion, and its sin is not on the driver. Optional conventional cover is not permitted unless a contract requires it. In a claim you may keep up to the total premiums you have paid; many muftis say any amount above that should go to the poor, unless it is compensation for damage someone else caused.
The four schools agree on this.
Explanation
Mainstream Hanafi scholars avoid conventional insurance because of gharar, gambling-like features and riba (see Is insurance haram?). But when the law will not let you drive without it, you are compelled, and Allah does not burden a soul beyond its capacity. Buying the legal minimum is permitted.
Optional cover. Comprehensive and collision cover are a choice, so the mainstream view is to avoid them. If a lender or leasing company requires full cover as a condition of the contract, it is treated like compulsory cover. Where takaful car cover exists, as in the UAE and the UK, prefer it.
Claims. Muftis distinguish three situations:
- Another driver was at fault and their insurer pays for your damage: this is compensation owed by the wrongdoer, and you may take it in full.
- Your insurer pays the other party for damage you caused: there is no problem, since it settles a debt you owed.
- Your own insurer pays you for your own loss: the mainstream view is that you may keep up to what you have paid in premiums, and give any excess to the poor. Some muftis allow keeping all of it under compulsory insurance.
Contemporary scholars of the four schools largely agree that legally required cover is allowed. For a large claim, ask a qualified mufti with the figures in hand.
Ask a mufti about your own case. This answer explains the general ruling. When the details of your situation matter, as they do here, ask a qualified mufti and give them the full facts. Where to ask a scholar.
The evidence
Quran, Surah Al-Baqara 2:286
لَا يُكَلِّفُ ٱللَّهُ نَفْسًا إِلَّا وُسْعَهَا ۚ لَهَا مَا كَسَبَتْ وَعَلَيْهَا مَا ٱكْتَسَبَتْ ۗ رَبَّنَا لَا تُؤَاخِذْنَآ إِن نَّسِينَآ أَوْ أَخْطَأْنَا ۚ رَبَّنَا وَلَا تَحْمِلْ عَلَيْنَآ إِصْرًۭا كَمَا حَمَلْتَهُۥ عَلَى ٱلَّذِينَ مِن قَبْلِنَا ۚ رَبَّنَا وَلَا تُحَمِّلْنَا مَا لَا طَاقَةَ لَنَا بِهِۦ ۖ وَٱعْفُ عَنَّا وَٱغْفِرْ لَنَا وَٱرْحَمْنَآ ۚ أَنتَ مَوْلَىٰنَا فَٱنصُرْنَا عَلَى ٱلْقَوْمِ ٱلْكَٰفِرِينَ ﴿٢٨٦﴾
Allah does not charge a soul except [with that within] its capacity. It will have [the consequence of] what [good] it has gained, and it will bear [the consequence of] what [evil] it has earned. "Our Lord, do not impose blame upon us if we have forgotten or erred. Our Lord, and lay not upon us a burden like that which You laid upon those before us. Our Lord, and burden us not with that which we have no ability to bear. And pardon us; and forgive us; and have mercy upon us. You are our protector, so give us victory over the disbelieving people."
What a person is compelled to do is not held against him.
Quran, Surah Al-Baqara 2:173
إِنَّمَا حَرَّمَ عَلَيْكُمُ ٱلْمَيْتَةَ وَٱلدَّمَ وَلَحْمَ ٱلْخِنزِيرِ وَمَآ أُهِلَّ بِهِۦ لِغَيْرِ ٱللَّهِ ۖ فَمَنِ ٱضْطُرَّ غَيْرَ بَاغٍۢ وَلَا عَادٍۢ فَلَآ إِثْمَ عَلَيْهِ ۚ إِنَّ ٱللَّهَ غَفُورٌۭ رَّحِيمٌ ﴿١٧٣﴾
He has only forbidden to you dead animals, blood, the flesh of swine, and that which has been dedicated to other than Allah. But whoever is forced [by necessity], neither desiring [it] nor transgressing [its limit], there is no sin upon him. Indeed, Allah is Forgiving and Merciful.
Compulsion lifts the sin within the limit of the need.
Sahih Muslim 1513
Sahih... نهى رسول الله صلى الله عليه وسلم عن بيع الحصاة وعن بيع الغرر ...
"The Messenger of Allah forbade the pebble sale and sales involving excessive uncertainty."
This is why optional conventional cover is avoided.
Where the ruling is recorded
- Radd al-Muhtar (Ibn Abidin), Kitab al-Jihad, Bab al-Musta'min, on sawkara. The Hanafi starting point on insurance contracts.
- al-Ashbah wa al-Nazair (Ibn Nujaym), The fifth principle: harm is removed, and necessities permit prohibitions. Basis for allowing what the law compels.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.