Borrowing from the real estate bank to build a house on the condition that it is insured with an insurance company
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Fatwa number ( 4031 )
Q: The Iraqi government recently abolished the profits imposed on loans from the real estate bank, the riba interest, but it required anyone who wants to borrow from the real estate bank to build a house for himself to insure his house with an insurance company, home insurance, by paying a specific sum of money to the insurance company only once. If the residence is damaged, he has the right to demand that the insurance company pay the amount of the loan to the real estate bank. Is it permissible to take the loan from the real estate bank on this condition? And if it is not permissible on this condition, is it permissible to take it on the condition that the borrower instructs his heirs after his death not to take the insurance company's compensation, but rather that they must pay the value of the loan to the real estate bank, just as he himself would not take this compensation if he remained alive?
A: This type of insurance is commercial insurance, and it is forbidden; because it contains gharar, riba, and ignorance, and it is not permissible for you to proceed to
take the loan from the bank, while committing to the condition of insuring the residence you intend to build with a loan from the real estate lending bank.
Q: The Iraqi government recently abolished the profits imposed on loans from the real estate bank, the riba interest, but it required anyone who wants to borrow from the real estate bank to build a house for himself to insure his house with an insurance company, home insurance, by paying a specific sum of money to the insurance company only once. If the residence is damaged, he has the right to demand that the insurance company pay the amount of the loan to the real estate bank. Is it permissible to take the loan from the real estate bank on this condition? And if it is not permissible on this condition, is it permissible to take it on the condition that the borrower instructs his heirs after his death not to take the insurance company's compensation, but rather that they must pay the value of the loan to the real estate bank, just as he himself would not take this compensation if he remained alive?
A: This type of insurance is commercial insurance, and it is forbidden; because it contains gharar, riba, and ignorance, and it is not permissible for you to proceed to
take the loan from the bank, while committing to the condition of insuring the residence you intend to build with a loan from the real estate lending bank.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.