The general takaful concept is you contribute a sum of money to a
takaful fund in the form of participative contribution (tabarru’). You
will undertake a contract (aqad) for you to become one of the
participants by agreeing to mutually help each other, should any of the
participants suffer any form of misfortune, either arising from death,
permanent disability, loss, damage or any other such misfortunes as
covered under the takaful you personally undertake.
History
All human activities are subject to risk of loss from unforeseen
events. To alleviate this burden to individuals, what we now call
insurance has existed since at least 215 BC. This concept has been
practiced in various forms for over 1400 years. It originates from the
Arabic word Kafalah, which means “guaranteeing each other” or “joint
guarantee”. The concept is in line with the principles of compensation
and shared responsibilities among the community.
Takaful originated within the ancient Arab tribes as a pooled
liability that obliged those who committed offences against members of a
different tribe to pay compensation to the victims or their heirs. This
principle later extended to many walks of life, including sea trade, in
which participants contributed to a fund to cover anyone in a group who
suffered mishaps on sea voyages.
How does takaful work?
All participants (policyholders) agree to guarantee each other and,
instead of paying premiums, they make contributions to a mutual fund, or
pool. The pool of collected contributions creates the Takaful fund.
The amount of contribution that each participant makes is based on
the type of cover they require, and on their personal circumstances. As
in conventional insurance, the policy (Takaful Contract) specifies the
nature of the risk and period of cover.
The Takaful fund is managed and administered on behalf of the
participants by a Takaful Operator who charges an agreed fee to cover
costs. These costs include the costs of sales and marketing,
underwriting, and claims management.
Any claims made by participants are paid out of the Takaful fund and
any remaining surpluses, after making provisions for likely cost of
future claims and other reserves, belong to the participants in the
fund, and not the Takaful Operator, and may be distributed to the
participants in the form of cash dividends or distributions,
alternatively in reduction in future contributions.
Differences between takaful and conventional insurance
The overwhelming majority of Islamic jurists have concluded that the
conventional insurance contract is unacceptable to Islam, not being in
conformity with the Shari’ah for the following main reasons:
1. it includes an element of al-gharar (uncertainty)
2. it is based on the theory and practice
of interest; a conventional life insurance policy is based on interest,
while an Islamic model is based on tabarru where a part of the
contributions by participants are treated as donation. For this reason,
policy holders in takaful are usually referred to as participants.
3. it is a form of gambling.
First and foremost, Islamic insurance, in conformance with the
Islamic Shari’ah, is a form of social solidarity (takaful), based on the
principles of trusteeship and co-operation.
1. In conventional insurance, the insured
substitutes certainty for uncertainty. In return for a predetermined
payment, the premium, he/she transfers to the insurer the possible
economic losses from stipulated risks. In Islamic insurance, the
participants share all risks mutually and no transfer of risk is
involved.
2. Conventional insurance companies are
motivated by the desire for profit, while Islamic insurance companies
are non-profit making, the shareholders not being entitled to share in
the profits of the business although they are entitled to charge fees
for their services and share in the investment returns of funds managed
by them
3. The policy-holders in a conventional
insurance company have no right to vote in the elections of the
directors of the company or to see the annual accounts of the company,
while in Islamic companies; these facilities are available to all
participants who pay a certain stipulated amount of premiums
(contributions).
4. In the takaful system, if the assured
dies before the policy matures, the beneficiary is entitled to the whole
amount of the premiums, the bonus and dividend and a share of the
profits made over the paid premiums, plus a donation from the company
out of the participants/policy-holder’s contributions given on the basis
of tabarru. Such a transaction is seen as a mutual contribution towards
the welfare of the helpless in society. Where the insured is still
alive on the maturing of the policy, he/she is entitled to the whole
amount of the premiums, a share of the profit made over the premiums, a
bonus and dividends according to the company policy.
5. In a conventional life insurance
policy, the agent’s payments are paid out of the insured’s paid
premiums, whereas in the Islamic model, the agents work for the company
and thus are paid by the company.
6. The insurable interest in the
conventional system is usually paid to the policyholder, if he/she is
alive at the expiry of the policy. If he/she dies before that date, the
insurable interest is paid to the beneficiaries, who may include
including family, servants, company, trustee, partners, mortgagor, etc.
But under the Islamic model, the insurable interest goes to the assured
or his/her heirs, according to the principles of Mirth or Wasiyyah.
“Sesungguhnya engkau tinggalkan anak dan isteri dalam
keadaan kesenangan adalah lebih baik daripada engkau tinggalkan mereka
dalam keadaan kesusahan dan meminta-minta.”
- dari riwayat Al-Bukhari & Muslim
source: various sources.
Mohd Asyran Bin Mohd
Noor
Weath Planner
Prudential BSN Takaful
Al-Isra' Associates Sdn
Bhd
(+60133872486)
