What is Takaful?
Takaful is an Arabic word, which means "togetherness". Takaful, or Islamic insurance, is based on mutual cooperation, social solidarity, responsibility, assurance, protection and financial assistance between groups of participants to indemnify losses of members. It is a Shariah-compliant alternative to conventional insurance. Takaful policies allow the contributor to enjoy the same level of cover provided by conventional insurance.
Under Takaful, contributors jointly indemnify each other against loss or damage in respect of any tragedy in human life or loss to the business or property, thereby offering crucial protection against risk, whilst at the same time being Shariah compliant. The contributors pay contribution to assist and indemnify each other and share the profits earned from business conducted by the Company.
Principles of Takaful
The term Takaful is derived from the root word ‘kafi’, which means guarantee or responsibility. Its chief characteristic is al-Musharakah meaning ‘sharing’. Thus, the word Takaful means shared responsibility, shared guarantee, collective assurance and mutual undertakings.
Takaful products that comply with Islamic Shariah principles share the common goal of providing a reasonable financial security against unpredicted catastrophe, disaster or risk befalling one’s life or property.
The Takaful system is truly unique and is based on the principles of Shariah. Relying heavily on the virtue of fairness to its consumers, the society and to the entrepreneurs bringing these products onto the market, this system helps all parties benefit fairly for their individual efforts.
Takaful, in its intended spirit, becomes a worthy cause, providing prudent financial security not only to its policyholders but also to the entire community.