From a Muslim’s perspective Islam is not just a religion but a way of life .Takaful is one of the principles in Islam that is prescribed for a Muslim community to sustain itself. Below are some of the most important things you need to know about Takaful;
- Takaful (Islamic Insurance) is an integral part of Islamic finance because it plays a significant social role in society. It promotes mutual help among participants in a society and is based on concepts that mitigate pure risk of participants.
The general Takaful concept is you contribute a sum of money to a Takaful fund in the form of participative contribution. You will undertake a contract 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.
- Takaful plays a significant financial planning role in society just like Islamic banks. It mobilizes public funds and reinvests it into various sectors of the economy. For example under the modified Agency and Partnership (A.P) model, the Takaful operator is not only an agent that collects contributions and pay claims ,it also acts as a fund manager on behalf of the participants. It uses the money in the participants fund and invests it into shariah compliant stocks and money market securities like Sukuk. The annual returns will be received in the form of a share of dividends and lease rentals that the operator will share with the participants in accordance with contracted profit sharing ratio. This way Takaful contribution creates instant “estates” for the participants. It provides financial security against disabilities and at times of urgent financial needs. Risk of death or accidents is ever present. Takaful can to some extent guarantee that our loved ones will have something to depend on when we are gone or become incapacitated.
- Takaful operators offer public schemes that safeguard the financial interest of participants and also looks for investment opportunities for them. The schemes fall under 2 categories:
General: Covers short term risks related to motor, fire, home and personal accidents .The total assets of this scheme are growing at a rate of28.2%in Malaysia. The contract among the participants is usually structured for 12 months with an option to renew once it expires.
Family: This scheme is the most famous in Malaysia for both individuals and Groups .Total income of Family Takaful funds is growing at 32% per year. It covers long term risks such as death, total permanent disability (TPD),health & medical, child educational and investment .The contract term is usually long term and expires at maturity.
- Takaful is not Insuring, participants are both the insurers and insured .Takaful operators only act as an agent or manager to overlook the scheme of things.
- Takaful is not about profitability instead its about mutuality and caring for the society. The moment Takaful operators focus on the profitability element when structuring a Takaful product, the spirit of Takaful gets diluted.
It is essentially a system of mutual assistance where members of a society who participate in a Takaful scheme spread out their liability among themselves.
Takaful has a huge potential to penetrate the Zambian & Philippines market because 14%(Z),5%(P) of the population is Muslim and for most the main attraction to Takaful may be the fact that it is in accordance with Islamic law.
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