Many insurances are available nowadays, but what if insurance is prohibited in your religion? So, much insurance is available according to your religion, like “Takaful Insurance.”
Takaful is an Islamic type of insurance in which people put money into a pool to protect each other from loss or damage. It is based on sharia, or Islamic religious law, which says that people must work together and look out for each other. Takaful policies cover insurance needs for health, life, and other things.
Takaful insurance companies were created as an alternative to commercial insurance companies, which are thought to violate Islamic laws against riba (interest), al-maisir (gambling), and al-gharar (uncertainty)
In this article, we will discuss all the things about takaful insurance. You need to do one thing need to read till the end.
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Understanding Takaful
In a takaful arrangement, all the parties or policyholders agree to back each other up and put their money into a pool or mutual fund instead of paying premiums. The takaful fund is made up of all the money given. The amount each participant pays depends on the type of coverage they need and their situation. Like a standard insurance policy, a takaful contract spells out the risk and how long it will cover you.
A takaful operator takes care of the takaful fund on behalf of the participants and charges an agreed-upon fee to cover costs. Costs include sales and marketing, underwriting, and managing claims like a regular insurance company.
Any claims made by participants are paid out of the takaful fund, and any leftover surpluses belong to the participants, not the takaful operator, after considering the likely cost of future claims and other reserves. These funds can be given back to the participants in cash dividends or distributions or by lowering the amount they have to pay in the future.
The following rules must be followed by a takaful fund run by an Islamic insurance company:
- It must work according to the rules of an Islamic cooperative.
- A reinsurance commission can only come from or go to an insurance or reinsurance company that follows Islamic law.
- The insurance company has to keep track of two different funds: a fund for participants and policyholders and a fund for shareholders.
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Things to think about
Allied Market Research says that the global takaful insurance market was worth $24.85 billion in 2020 and is expected to grow at a CAGR of 14.6% from 2021 to 2030 when it will be worth $97.17 billion.
A Research and Markets report said that the following were some of the biggest names in the takaful market:
- Islamic Insurance Company
- JamaPunji
- AMAN
- Salama
- Standard Chartered
- Takaful Brunei Darussalam Sdn Bhd
- Allianz
- Prudential BSN Takaful Berhad
- Zurich Malaysia
- Takaful Malaysia
- Qatar Islamic Insurance Company.
Takaful Insurance vs. Regular Insurance
Most Islamic jurists conclude that traditional insurance is unacceptable in Islam because it does not follow sharia.
- There is an element of al-gharar, or uncertainty, in traditional insurance.
- The idea and practice behind conventional insurance are to charge interest.
- On the other hand, Islamic insurance is based on tabarru, which means that a part of the money people pay is treated as a donation.
- This is why people who buy takaful policies are often called “participants.”
- People think of traditional insurance as a form of gambling.
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