2. Takaful
Guaranteeing each other / Joint Guarantee / Share
Responsibility / Mutual Guarantee / Mutual Support
It is a system of Islamic insurance, based on the principle
of Ta’awun (mutual assistance) and Tabarru’ (Donation)
where the risk is shared collectively by all participants
voluntarily.
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3. Takaful
• A scheme based on brotherhood, solidarity
and mutual assistance which provides mutual
financial aid and assistance to the participants
who mutually agree to contribute for that
purpose.
• This is a pact among a group of members or
participants who agree to jointly guarantee
among themselves protection against loss or
damage to any of them as defined in the pact.
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4. Basis and Maqasid (Objective)
1. ." Help you one another in Al-Birr and At-Taqwa
(virtue, righteousness and piety); but do not help one
another in sin and transgression. ". (Al-Quran)
2. “fortunate many helping the unfortunate few".
(Principle)
3. “Set up a fund box to help members who face hardship
due to death of their breadwinner” (Principle)
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5. Comparison
Insurance
Insurance is a contract between two parties, whereby one party agrees to
undertake the risk of another in exchange for consideration known as premium,
and promises to pay a fixed sum of money to the other party on happening of
an uncertain event or after the expiry of a certain period.
The party bearing the risk is known as the insurer. The party whose risk is
covered is known as the insured.
Takaful
Takaful is based on the principle of Ta’awun (Mutual Assistance) and
Tabarru’(Gift, Give away, Donation), where the risk is shared collectively by the
group voluntarily.
This is a pact among a group of members or participants who agree to jointly
guarantee among themselves protection against loss or damage to any of
them as defined in the pact
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6. Takaful
Comparison on commercial factors
Based solely
Insurance
Based on mutual cooperation
Tabarru’ Contract
Free from Riba (interest), Gharar
(uncertainty), and Maysir (gambling)
Includes elements of interest,
uncertainty and gambling
All or Part of the contribution paid by
the Participant is a donation to the
Takaful Fund, which helps other
Participants by providing protection
against potential risks
The premium is paid to conventional
insurance companies, and it is owned
by them in exchange for bearing all
expected risks
There is a full segregation between
the Participants’ Fund account and
the Shareholders' Fund accounts
Premium paid by the Policyholder is
considered as income for the
company, and belongs to the
shareholders
Claims paid from Participants’ fund
Claims paid from Company's fund
In case of a deficit in the Participants’
Takaful Fund, the Takaful operator
(Wakeel) provides interest-free loan
(Qard Hasan) to the Participants’
Fund. (From SH Fund)
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Buying and Selling Contract
In case of deficit, the company bears
it.
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7. Comparison
Takaful
Insurance
Any surplus in the Takaful Fund is shared
among Participants.
The investment profits are distributed
among Participants and Shareholders on
the basis of Mudaraba or Wakala models
All surpluses and profits belong to the
Company/Shareholders only
The Participants’ Fund and Shareholders’
Fund is invested in investment funds and
channels that are Shariah compliant.
The capital of the premium is invested in
funds and investment channels that are not
necessarily Shariah compliant.
Takaful companies have re-insurance with
Re-Takaful companies or with
conventional re-insurance companies that
adhere to certain conditions of Shariah.
Conventional insurance companies do not
necessarily have re-insurance with reinsurance companies that are Shariah
compliant.
Subject to the Governing law as well as a
Only subject to the Governing law
Islamic Law / Shariah Supervisory Board
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8. Prohibited Elements
No
Element
Meaning and Definition
1.
Gharar,
Khatar &
Mayser
Uncertainty , Risk & Gambling,
• lack of knowledge about the contract (object, price, time
of delivery).
• Uncertainty about the existence and delivery of the
object, or uncertainty about the outcome.
• The inability to complete the sale, fairness in contracts
including preventing the unjust devouring of people's wealth.
(akl al-mal bi’l-batil)
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9. Prohibited Elements
No.
Elements
Meaning and Definition
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Riba
Interest
• In Islamic terminology interest means effortless profit,
or that profit which comes without compensation, or that
extra earning obtained that is free of exchange
• or a loan with the condition that the borrower will return
to the lender more than / better than the quantity
borrowed
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Other
It is forbidden to deal with something that is haram
(forbidden) to eat or use.
The Prophet (peace and blessings be upon him) is
reported to have said, "If Allah makes consumption of
something haram, He also makes dealing in such thing
haram (impermissible).
10. Conclusion
Takaful
The participation in a Takaful fund must be undertaken with utmost
sincerity in order to help those faced with difficulties.
Every policy holder would pay his subscription in order to assist those who
need assistance
Any member or participant suffering a catastrophe or disaster would receive a
certain sum of money or financial benefit from the fund, to help him/her
mitigate the loss or damage
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11. Conclusion
Takaful
The transactional aspect of the commercial activity of Takaful must be subject
to the Islamic contractual laws in order to ensure its compliance with the
Shariah.
In order to eliminate the element of “uncertainty” in the Takaful contract, the
concept of tabarru (to donate, to contribute, to give away) is incorporated
in it. In relation to this a participant shall agree to relinquish as “gift” certain
portion of his Takaful installments.
For the service rendered as manager of the Takaful Operations the company
is allowed to charge a Management Fee (Wakala Fee)
The Takaful Fund, consisting of the contributions paid as Tabarru, can further be
invested by the Company based on Islamic principle of Mudarabah, and surplus
will be shared on an agreed-upon ratio.
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