What is Takaful?

The word Takaful  (تكافل) means "joint pledge" and comes from the Arabic root word "kafala" كفل)) which means pledge. In essence then takaful means mutual responsibility or guarantee. In contemporary practice, it is based upon the notion of a group of people (participants) who have common interests, offering mutual help or solidarity to each other to protect or guarantee members in the event that a certain defined misfortune or mishap should affect any member. To be able to make this payment possible, a mutual pool is created comprising of the donations (Tabarru) from each participant.

Is Takaful Shariah compliant?

Takaful, if practiced and set up correctly, by its very nature is Shariah compliant as it is based on the principle of mutual cooperation and mitigates the objectionable aspects found in conventional insurance, gharar, maysir and riba. Unlike under conventional insurance where once the policyholder pays the premium for protection, the money then belongs to the Insurance Company and if no loss occurs, the premium is lost to the company, your Takaful Solidarity Fund contribution is an agreement with the other participating members to offer mutual assistance to each other. The money is invested in Shariah compliant funds and at the end of each financial year any surplus in the Takaful Fund will be distributed to all contributing participants.

How does Takaful protection work in practice?

All the contributions of all participants is pooled under one fund, the Takaful Solidarity Fund, and will be used to pay for any contingency should any participating member suffer a loss, be it on their property or life. In essence participating members essentially protects each other by ensuring compensation from the Takaful Solidarity Fund for any or all defined losses incurred by any member.

How does the Wakalah work? Who is the Wakeel?

AL AHLI TAKAFUL COMPANY, a life insurance company incorporated under the Laws of the Kingdom of Saudi Arabia, acts as the Wakeel.

The Wakeel will manage the assets of the Participant Takaful Solidarity Fund and the Participant Investment Strategies.

The Wakeel will manage the Participant Takaful Solidarity Fund on behalf of the Participants, arrange and administer Retakaful for the protection of the Participant Takaful Solidarity Fund, pay benefits and settle claims on death or surrender.

What are the differences between a Takaful and conventional insurance plan?

Conventional Insurance is essentially a contract of Exchange, a Sale and Purchase agreement, between the Insurer (Company) who sells and the Insured (Policyholder) who buys the policy. Insurer provides protection in return for charging a premium. Policyholders have no relationship amongst themselves, even though their premiums are collected in the same pool. Insurer is responsible to pay claims from its own assets (insurance premiums and shareholder funds) while profits generated by the fund belong to the Insurer.

Takaful, on the other hand, forms a contract of tabarru (donation) and ownership is between the participating members. It is an understanding of cooperation amongst each other. The Insurer (Operator) has no part in this except as manager of the fund. Participants guarantee to protect each other through the tabarru (donation) while the Wakeel only manages the fund and payments on behalf of the participants. Any Takaful Solidarity Fund surplus remaining at the end of the year belongs to the participants.

What happens if there are no claims made on the Takaful Solidarity Fund?

The salient feature of the Takaful Solidarity Fund is that whether claims are made or not, any surplus created in the fund (after deducting applicable management and other fees), has to be distributed back to the participating members.

Why do we need Takaful if everything that happens in the world is by the will of Allah (Qada' or Qadar)?

There are no U-turns on the road of life. We are all travelling on an inevitable trip from birth to eventual death. You may die sooner than expected or hopefully live a long and prosperous life. Takaful does not attempt to supersede the power or will of Allah in any manner, but it addresses the tragedy of premature death by providing funds to help survivors who depended on you, get on with their lives. This is very much in accordance with Shari’ah principles that encourage to help those in need. This ideology derives its support from the Quranic verse:

In another Hadith the Prophet (PBUH) says:

Thus to minimize the financial impact on your family should unexpected misfortune strike, it is important to consider an appropriate Takaful plan so that your loved ones can continue to enjoy and maintain the financial comfort they are accustomed to.    

What are the benefits of this Programme?

1. Benefits at Maturity and at Surrender

In the event of maturity or surrender, the value of the contract (the Participant’s Share) shall be paid to either you and/or a Beneficiary. In case of surrender any outstanding fees as per the General Terms and Conditions of the Programme shall be deducted.

You will consent to relinquish the Takaful Solidarity Donations paid by you to the Participant Takaful Solidarity Fund for the benefit of the remaining Participants and to support the Participant Takaful Solidarity Fund.

2. Benefits at death

The Benefits payable in the event of death before the Maturity Date of the Contract are:

(a) the investment value of the Contract and

(b) the Takaful Benefits as at the date of death.

Takaful Benefits are the sum of the outstanding future regular contributions of a Participant for the remainder of the term of a Contract. The level of the Takaful Benefits at inception of the contract may be limited to be commensurate with the individual risk situation (health & age, avocation, occupation etc.) of the Participant. The Takaful Benefits established at inception are shown to the Participant on its Certificate.

The Takaful Benefits established at the inception will reduce in equal and fixed installments over the duration of the Contract to be zero at the Maturity Date.