Takaful Insurance
Coverage
KUALA LUMPUR, NOVEMBER 9, 2005 - ISLAM does not object to
insurance per se but regards the conventional insurance scheme as
not Syariah-compliant since it involves the elements of gharar (uncertainty),
maisir (gambling) and riba (interest) in the insurance contract.
The establishment of takaful entities are intended to bridge the
gap deemed objectionable by the Syariah for the benefit of society
by offering syariah-based or better known as takaful covers.
The takaful insurance concept that is grounded in Islamic Muamalat
is not something new but has been practised for over 1,400 years.
The word 'takaful', which is Arabic, simply means taking care of
one another. In principle, the takaful system is based on mutual
cooperation, responsibility, assurance, protection and assistance
between groups of participants.
Generally, this concept offers an insurance plan which is based
on two aqads (contracts), namely, the tabarru' (donation) and mudharabah
(investment) that is sincere (ikhlas) and is managed professionally
by takaful organisations.
The takaful cover that is based on the tabarru' aqad (agreement)
covers the following elements:
- Responsible to one another
- Cooperation and helping one another
- Protecting one another from any difficulties and disasters
Thus, tabarru' can be defined as a form of sincere donation that
is given by one party with the intention of helping others to bear
monetary losses and misfortunes that may befall. One does not expect
any exchanges or rewards from other parties.
It is considered as a noble practice in Islam since there are so
many benefits that can be derived as long as it is with an 'ikhlas'
intention.
A wide range of product offerings is available under takaful coverage
suitable for both personal and business needs.
Among the most popular product offerings are motor, MRTA (mortgage
reducing term assurance), fire (for both buildings and stock in
trade), PA (personal accident) and bancatakaful (covering education,
hospitalisation, etc).
Major benefits of takaful products that are not applicable under
conventional insurance are summarised as follows:
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The contributions made by takaful policyholders are deposited
into one special fund. The function of the fund is to provide
financial assistance to policyholders who are in dire financial
need due to losses or misfortunes. |
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If there are no claims made during the cover period, policyholders
will be rewarded with 'hibah', that is, a cash reward, which
may be withdrawn in cash or used to off set the premium for
the next cover period. |
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For takaful MRTA, a portion of the premium paid is invested
and the earnings from the investment are given back to the policyholder
upon maturity, subject to no claims being made during the cover
period. |
Financing of takaful MRTA contribution (premium) could also be
arranged with some financial institutions.
Some takaful operators offer a discount on the premium for certain
products to participants who are in their twenties.
Takaful covers are available for all irrespective of race or religious
beliefs. For Muslims, it "profits" them in the spiritual
sense by helping them fulfill their religious obligations and social
responsibilities while for non-Muslims, this is a viable alternative
to their insurance needs.
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