Assalamu Alaikum Mufti Saheb I have enquired previously regarding finance from Albarakah bank . I wish to use their service as I do not want to pay interest . However , one of their pre-requisites is that one has to have house-hold insurance . Is this permissible?
Kindly find below a response we received from Al-Barakah Bank.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai
FATWA DEPT.
Assalamu Alaykum Wa Rahmatullaahi Wa Baraakutuhu
RESPECTED MUFTI EBRAHIM DESAI SAHEB
WE REFER TO YOUR EMAIL DATED 11 JUNE AND THANK YOU FOR APPROACHING US FOR
OUR COMMENTS.
THE QUESTION REFERS TO HOUSE HOLDERS INSURANCE.THIS TYPE OF INSURANCE COVERS
THE CONTENTS OF A HOUSE.WE DO NOT REQUIRE THIS TYPE OF INSURANCE POLICY NOR
HAVE WE CALLED FOR THIS FROM OUR CLIENTS.
THE OTHER TYPE OF POLICY IS A HOUSE OWNERS INSURANCE POLICY WHICH COVERS THE
BUILDING ITSELF AGAINST CERTAIN RISKS SUCH AS FIRE.ALBARAKA BANK INSISTS ON
THIS POLCY IN MOST CASES FROM CLIENTS WHO AVAIL OF PROPERTY FINANCE FROM THE
BANK.
THE REASON FOR THIS IS THAT ALBARAKA BANK WAS HEAVILY CRITISED BY THE SOUTH
AFRICAN RESERVE BANK(SARB) FOR NOT HAVING THIS TYPE OF COVER ON PROPERTIES
FINANCED BY THE BANK.SARB HAS INSISTED THAT WE OBTAIN THIS TYPE OF COVER
FROM OUR PROPERTY FINANCE CLI
ENTS AS WITHOUT IT THE RISK PROFILE OF THE BANK IN THE EYES OF SARB WILL
INCREASE.THE REASONING BEHIND THIS IS THAT IF A PROPERTY IS DESTROYED BY SAY
FIRE THEN THERE WILL BE A TENDENCY ON THE PART OF A CLIENT TO DEFAULT ON HIS
PAYMENT TO THE BANK.
IN VIEW OF SARB REQUIREMENTS WE HAVE TO INSIST ON THIS POLICY.
HOWEVER WE DO MAKE AN EXCEPTION WHERE A CLIENT CAN DEMONSTRATE TO THE BANK
THAT HE HAS INCOME AND ASSETS TO CONTINUE PAYMENTS TO BANK SHOULD THE ABOVE
EVENTUALITY OCCUR.WHERE SUCH A CLIENT REQUESTS INSURANCE COVER TO BE WAIVED
WE OBTAIN AN INDEMNITY TO BE SIGNED BY THE CLIENT FOR VIEWING BY SARB.
CLIENTS ARE FREE TO CANCEL THEIR INSURANCE COCER AS SOON AS THEY HAVE REPAID
THE BANK.
WE TRUST THAT THIS EXPLANATION WILL HELP IN RESPONDING TO THE QUESTION.
PLEASE DO NOT HESITATE TO CONTACT ME SHOULD YOU REQUIRE ANY FURTHER
CLARIFICATION.
WAS SALAAM
AHMED KADWA