Takaful
What Is Takaful?
Takaful is a type of Islamic insurance wherein individuals contribute money into a pool framework to guarantee each other against loss or damage. Takaful-marked insurance is based on sharia or Islamic strict law, which makes sense of how people are responsible to cooperate and safeguard each other. Takaful policies cover wellbeing, life, and general insurance needs.
Takaful insurance companies were acquainted as an alternative with those in the commercial insurance industry, which are accepted to conflict with Islamic limitations on riba (interest), al-maisir (gambling), and al-gharar (vulnerability) principles — which are all outlawed in sharia.
Understanding Takaful
All gatherings or policyholders in a takaful plan consent to guarantee one another and make contributions to a pool or mutual fund as opposed to paying premiums. The pool of collected contributions makes the takaful fund. Every participant's commitment is based on the type of coverage they require and their personal conditions. A takaful agreement determines the idea of the risk and the length of the coverage, like that of a conventional insurance policy.
The takaful fund is managed and administered for the participants by a takaful operator, who charges a settled upon expense to cover costs. Similar as a conventional insurance company, costs incorporate sales and marketing, underwriting, and claims management.
Any claims made by participants are paid out of the takaful fund and any excess overflows, in the wake of making provisions for the logical cost of future claims and different reserves, have a place with the participants in the fund — not the takaful operator. Those funds might be distributed to the participants as cash dividends or distributions, or by means of a decrease in later contributions.
An Islamic insurance company operating a takaful fund must operate under the accompanying principles:
- It must operate as per Islamic cooperative principles.
- A reinsurance commission may just be received from or paid out to Islamic insurance and reinsurance companies.
- The insurance company must keep two separate funds: a participant and policyholder fund, and a shareholder fund.
Special Considerations
As per Allied Market Research, the global takaful insurance market was valued at $24.85 billion out of 2020 and is projected to reach $97.17 billion by 2030, developing at a CAGR of 14.6% from 2021 to 2030.
Since 60% of the global Muslim population is included youthful Muslims — under 25 years old — this demographic can address a sizeable customer base as their wealth develops after some time.
Probably the biggest names in the takaful market, as per a Research and Markets report, were accepted to the follow:
- 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 versus Conventional Insurance
Most Islamic law specialists presume that conventional insurance is unsatisfactory in Islam since it doesn't conform with sharia for the accompanying reasons:
- Conventional insurance incorporates an element of al-gharar or vulnerability.
- Conventional insurance is based on the idea and practice of charging interest. Islamic insurance, then again, is based on tabarru, where a piece of the contributions made by participants is treated as a donation. For this reason policyholders in takaful are typically alluded to as participants.
- Conventional insurance is viewed as a form of gambling.
Features
- Any claims made by participants are paid out of the takaful fund.
- Takaful is a type of Islamic insurance wherein individuals contribute money into a pool framework to guarantee one another.
- Takaful-marked insurance is based on sharia or Islamic strict law and covers wellbeing, life, and general insurance needs.
