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Many have believed that the concept of takaful is a form of Islamic insurance, however, based on the principles of mutual cooperation and mutual protection, it is not, thus, making it an ethical and community-driven option. Takaful is fundamentally different from insurance in its principles and how it operates. Within this article, we will describe what takaful is, the advantages as well as differences between takaful and conventional insurance.
Takaful is known as one of the wealth instruments that based on cooperation to provide coverage/Takaful benefit in the event of misfortunes. It is based on the principles of cooperation and mutual assistance. The word "takaful" comes from the Arabic word "kafalah," which means mutual guarantee.
In takaful, certificate holders pool their funds together to help each other in times of need. This is done through a takaful operator, which manages the fund and pays out Takaful benefits when they arise. The takaful operator charges a fee for its services, which is deducted from the contributions made by the certificate holders.
Takaful operates on the principles of cooperation, mutual assistance, and shared responsibility. The contribution paid by the certificate holders are based on the concept of tabarru’. What is tabarru’ in takaful? Tabarru’ means donation that the certificate holder willingly relinquish in order to help and provide assistance to other participants in need. Certificate holders voluntarily contribute to the takaful fund, which is then used to pay benefits to those who suffer a loss.
What are the differences between takaful and conventional insurance? Are they even that different at all? Takaful is considered to be more ethical and socially responsible than conventional insurance because it operates on the principles of fairness and solidarity. Takaful is also shariah compliant in comparison to conventional insurance. This is because takaful is known to align with the Islamic principle of risk-sharing, which prohibits the charging of interest or engaging in activities that involve uncertainty or speculation.
Takaful can be for anyone who wants protection plan that is in line with Islamic principles. However, certain types of takaful products may be more suitable for certain demographic groups.
For instance, family takaful products are designed to provide protection for families in the event of the demise or disability of the primary breadwinner. These products are typically more suitable for families with dependents who rely on the primary breadwinner's income. Personal takaful products, such as health protection or future goals, are available for just about anyone from young to old.
In general, takaful can be suitable for anyone who is interested in protection plan that is based on the principles of cooperation, mutual assistance, and shared responsibility. Takaful may appeal to individuals who are interested in socially responsible investing and ethical finance. There are various advantages of takaful over conventional insurance such as, Takaful offers badal hajj/waqf services, which conventional insurance do not offer.
Takaful is a concept that is gaining popularity around the world. It not only caters to the Muslim community but to just about anyone who wants to contribute to the greater good of society. Takaful offers a wide range of coverage options perfect for you. Learn more with Great Eastern Takaful Berhad today!