Customers’ Frequently Asked Questions
ALL YOU NEED TO KNOW ABOUT TAKAFUL
We recognise and acknowledge that there are many questions one might have about Takaful. Often, we receive enquiries about Takaful – be it in relation to Islam, its concept, and acceptability or how it can help protect your savings, assets and well-being.
We recognise and acknowledge that there are many questions one might have about Takaful. Often, we receive enquiries about Takaful – be it in relation to Islam, its concept, and acceptability or how it can help protect your savings, assets and well-being.
At SABB Takaful, we are committed to continuously provide information to help people make an informed decision before choosing any of our Takaful plans
This booklet contains frequently asked questions regarding Takaful to which we have provided the answers. We also hope that we are able to convince you why Takaful plans are important for both you and your loved ones, helping you achieve you financial goals.
Frequently Asked Questions about Takaful
Q: Is the concept of insurance haram in Islam?
Q: Is the concept of insurance haram in Islam?
The concept of insurance is not haram in Islam when undertaken in the framework of Takaful or mutual co-operation and solidarity. Contrary to conventional insurance, Takaful does not consist non-permissible elements such as gharar (uncertainty), gambling and investing in interest bearing instruments .Islam encourages mutual co-operation as Allah says in the Quran :
" وتعاونوا على البر و التقوى " سورة المائدة.
“ And help you one another in righteousness and piety “
Surah Al Maidah 5:2
Q: Why is conventional insurance considered haram for Muslims?
Conventional insurance is based on a contract of exchange (sale) between the insurance company and the covered person. This contract is void because it has one or all of the following elements, which is not permissible from Shariah’s perspective:
Gharar:(Uncertainties) Conventional insurance has an element of Gharar due to the promise to pay a sum of money upon the occurrence of unsuspected events
Maysir: (Gambling) Existence of gharar (uncertainties) leads to maysir (gambling) in conventional insurance. The insured may either lose all the premiums he has paid or be compensated for the losses he incurs for the insured event
Riba: (Usury/Interest) The investments of insurance funds in interest bearing securities such bonds and stocks, which do not comply with Shariah principles, pose a major problem for Muslims who purchase the conventional insurance
Q. Why do we need Takaful if everything that happens in this world is by the will of Allah (Qada’ and Qadar)?
Takaful is not superseding the power or will of Allah in one’s life, death or destiny (Qada’ and Qadar) but is achieving the pleasure of Allah who orders us to “help … one another in righteousness and piety”. The main objective of Takaful is to provide a level of comfort to the participants against unexpected future risk through mutual cooperation. In the following hadith, the Prophet (PBUH) advises us to overcome and relieve the hardship of others:
من نفس عن مؤمن كربة من كرب الدنيا نفس الله عنه كربة من كرب يوم القيامة و من يسر على معسر يسر الله عليه في الدنيا والآخرة. صحيح مسلم
“Whosoever removes a worldly hardship from a believer Allah will remove from him one of the hardships of the hereafter. Whosoever alleviates the needy person, Allah will alleviate from him in this world and the next” Sahih Muslim
Allah says,
و الذين يتوفون منكم و يذرون أزواجا وصية لأزواجهم متاعا إلى الحول
"Those of you who die and leave widows should bequeath for their widows a year's maintenance and residence" (2:240).
The Prophet (PBUH) says,
"لأن تدع ورثتك أغنياء خير من أن تتركهم عالة يتكففون الناس ".متفق علية
“Verily it is better for you to leave your offspring wealthy than to leave them poor asking others for help” Sahih al-Bukhari
Also, there is a hadith where the Prophet (PBUH) saw a Bedouin leaving a camel and he asked the Bedouin, "Why don't you tie down your camel?" The Bedouin answered, "I put my trust in Allah." The Prophet said, "Tie your camel first, then put your trust in Allah." (Al-Tarmizi and Ibn Majah).
To minimise the financial impact on your family should unexpected misfortunes happen to you, you might want to consider appropriate Takaful plans so that you can continue to maintain the financial comfort for your family.
To minimise the financial impact on your family should unexpected misfortunes happen to you, you might want to consider appropriate Takaful plans so that you can continue to maintain the financial comfort for your family.
Q: What is Takaful?
Takaful means "guaranteeing each other" in Arabic. It is an Islamic system of mutual insurance built around the concept of 'tabarru' (donation, gift).
'Tabarru' contributions are made with the intention to help other participants faced with difficulties and to eliminate the resemblance of Takaful to gambling and exploitation. Each participant contributes to a fund to cover any claims, while also benefiting from a share of any surplus declared.
Takaful means "guaranteeing each other" in Arabic. It is an Islamic system of mutual insurance built around the concept of 'tabarru' (donation, gift).
'Tabarru' contributions are made with the intention to help other participants faced with difficulties and to eliminate the resemblance of Takaful to gambling and exploitation. Each participant contributes to a fund to cover any claims, while also benefiting from a share of any surplus declared.
The SABB Takaful Company role is to manage the Takaful operations and investTakaful contributions in line with the Shariah principles. Participants share in profits of the fund with the understanding that these may be forfeited to cover losses. When there is surplus, it is jointly shared.
Q: How does Takaful protection work?
Your contribution for coverage is pooled under one fund i.e. participant’s Takaful Fund and will be used to pay for any contingency should any of the members who participate in the scheme suffer any catastrophic loss, be it on their property or life. In other words, each member of the scheme essentially protects others by guaranteeing compensation from the Takaful Fund for the defined losses incurred by any members of the scheme.
Your contribution for coverage is pooled under one fund i.e. participant’s Takaful Fund and will be used to pay for any contingency should any of the members who participate in the scheme suffer any catastrophic loss, be it on their property or life. In other words, each member of the scheme essentially protects others by guaranteeing compensation from the Takaful Fund for the defined losses incurred by any members of the scheme.
Q: Is Takaful Shariah compliant?
Takaful is Shariah compliant as it is based on the principle of cooperation, not sale or exchange, and mitigates the objectionable aspects of gharar, maysir, and riba. This is contrary to the conventional insurance, where policyholders pay premiums as a price for protection against catastrophe. If catastrophe occurs, the policyholder will be protected. The policyholder will lose the premium to the insurance company if such catastrophe does not occur.
However, your contribution to the Takaful fund is an agreement with other members (participants) of the fund to mutually help each other by way of providing financial assistance should any member of the fund suffer a catastrophe or disaster. Moreover, Takaful fund invests your contribution in a Shariah-compliant manner avoiding any interest-based instruments. In addition, any surplus will be redistributed to the Participants.
The Takaful Company therefore only manages this pool (for a fee) for the benefit of the members/participants.
Takaful is Shariah compliant as it is based on the principle of cooperation, not sale or exchange, and mitigates the objectionable aspects of gharar, maysir, and riba. This is contrary to the conventional insurance, where policyholders pay premiums as a price for protection against catastrophe. If catastrophe occurs, the policyholder will be protected. The policyholder will lose the premium to the insurance company if such catastrophe does not occur.
However, your contribution to the Takaful fund is an agreement with other members (participants) of the fund to mutually help each other by way of providing financial assistance should any member of the fund suffer a catastrophe or disaster. Moreover, Takaful fund invests your contribution in a Shariah-compliant manner avoiding any interest-based instruments. In addition, any surplus will be redistributed to the Participants.
The Takaful Company therefore only manages this pool (for a fee) for the benefit of the members/participants.
Q: How can I be certain Takaful plans are Shariah compliant?
All our Takaful plans will be reviewed and approved by the SABB Takaful’s Shariah Committee prior to these plans being offered to the public. The Shariah supervisory Committee members are:
All our Takaful plans will be reviewed and approved by the SABB Takaful’s Shariah Committee prior to these plans being offered to the public. The Shariah supervisory Committee members are:
- Sheikh Abdullah Bin Sulaiman Al Manea
- Sheikh Dr. Abdullah Al Mutlaq
- Sheikh Dr. Mohammed A. Elgari Bin Eid
Q: What are the differences between Takaful and Non-Takaful?
The major differences can be summarised as below:
The major differences can be summarised as below:
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Takaful
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Non-Takaful
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Contract
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· The contract amongst participants of the Takaful Fund is the contract of tabarru (donation, gift) and therefore is about cooperation and mutual help amongst them. The company is appointed as Wakeel to manage the fund.
· Takaful contracts are transparent |
· Contract of Exchange i.e. Sale and Purchase agreement between Insurer (the company) and the Insured upon which the insured buy and the insurer sells the policy.
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Responsibility for providing protection
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· Participants are responsible to protecting each other through tabarru’ (donation, gift).
· The Takaful operator only manages the Takaful operations on behalf of participants. |
· Non-Takaful companies, other than mutual companies, provide protection in return for premiums.
· Policyholders have no relationship amongst themselves though they contribute to the same insurance fund. |
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Surplus
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· The Takaful surplus belongs to the participants.
· A portion of the surplus is to be distributed back to the participants. |
· Any surplus belongs to the Insurer.
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Liability of the insurer/ operator
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· The Takaful operator, acting on behalf of the participants, pays claims from the Takaful Fund.
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· Insurer is responsible to pay claims from its assets (insurance funds and shareholders’ fund)
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Investment
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· All funds are invested in Shariah compliant investments
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· Funds received will be invested in both Shariah and non-Shariah investments.
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Q: What happens if there is a surplus on the Takaful Fund?
One unique aspect of Takaful is the sharing of surplus of the Takaful Fund amongst the Participants. A portion of the surplus must be returned to the Participants. The surplus is calculated after deducting expenses such as claims, net re-Takaful costs, and changes in the technical reserves.
