What is Takaful?

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Takaful is Islamic insurance wherein members contribute money into a pool system to guarantee each other against loss or damage. Takaful-branded insurance is based on Shariah or Islamic religious law, which explains how individuals are responsible to cooperate and protect one another. Takaful policies cover health, life, and general insurance needs.

 

Under Shariah-compliant insurance policies, it uses Aqad which are actually contracts. These contracts must be free of Riba (interest), Maisir (gambling) and Gharar (uncertainty).

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How Takaful works?

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All parties or policyholders in a takaful arrangement agree to guarantee each other and make contributions to a pool or mutual fund instead of paying premiums. These contributions are treated as Tabarru (donation). The donations are pooled to create the takaful fund and support those in need.

 

It goes with the concept of sharing the risk, where the misfortune of the few outweighs the benefits of the many. Meaning whenever an unfortunate incident happens, the pool uses its resources and provides financial aid to the unfortunate few.

 

Each participant's contribution is based on the type of coverage they require and their personal circumstances. A takaful contract specifies the nature of the risk and the length of the coverage, similar to that of a conventional insurance policy.

 

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Additional Benefits

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Certain takaful insurances also present rebates at the end of the term or upon renewals. How these rebates happen, is that surpluses in the collective fund at the end of the term will be distributed back to the participants of the pool on an equal basis.

 

The second benefit that one receives is non-monetary and is said to be more spiritual. Through the act of donation, the participants of the funds are said to enjoy additional blessings from Allah.

                                                                                                                                                         

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There are 2 basic types of takaful: Family Takaful and General Takaful.

 

Family Takaful Products:

 

• Family takaful

• Investment-linked takaful

• Child education takaful

• Medical & health takaful

 

General Takaful Products:

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• Home takaful

• Motor takaful

• Personal accident takaful