Is it permissible to take a business loan which requires payment of an insurance premium?

Hawkesbay Investment Corporation Limited

The business is in conformity with standards and in line with normal  corporate ethics. Based on the loans agreement   drafted by our client and we guarantee that our client will only enter into a legitimate  business transaction as proposed with the funds.

Legal & General Insurance  company  hereby  guarantee the safety of your  investment  of  ($ 1,000,000.00) with our client  and shall indemnify you on demand the total  value  of said amount  against  all liabilities, losses, costs incurred and expenses within 6 months or one year.

This letter of Indemnity is also subject to the terms and condition contained in the general agreement. In case of any conflict the terms therein shall prevail.

A: There are actually two contracts mentioned in the question; a loan contract and an insurance contract. No details have been supplied on the loan contract and so I am unable to comment upon the loan contract per se. However, it is not permissible to enter into the insurance contract as that does not conform to the principles of sharia.  If the insurance contract is a requirement for the loan contract, it is not permitted to enter in to the loan contract even if the loan contract was to be permissible of itself.

And Allah knows best.

Mufti Mohammed Zubair Butt

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