What is takaful?

Takaful is a protection plan based on Shariah principles. You contribute a sum of money to a common takaful fund in the form of participatory contribution (tabarru'). You undertake a contract (aqad) to become one of the participants by agreeing to mutually help each other, should any of the participants suffer a defined loss.

Sharing of surplus for takaful

One unique feature of a takaful plan is the sharing of surplus of the fund between you and the takaful operator based on pre-agreed ratio.

The surplus is arrived at after deducting expenses such as claims, re-takaful, technical reserves and management expenses.

You are entitled to this surplus if you had not made claims during the period of takaful.

For example, a takaful operator has total surplus (S) of RM4 million and total general contribution (GC) of RM10. You contribution (C) for the year is RM1, 000 and surplus will be shared between you and the takaful operator at pre-agreed sharing ratio (PSR) of 50:50. The share of surplus that you will receive is calculated as follows:

Surplus sharing ratio = PSR: 50% x S: RM4 million

                                              GC: RM10 millon

                                         = 20%

Surplus attributable   = Surplus sharing ratio x C: RM1, 000 to you                   

         = RM200

Shariah Supervisory Council is a must for takaful operators

To ensure compliance with Shariah principles:

Takaful operators are required to set up Shariah Supervisory Council, which advise management and ensure that their activities comply with Shariah principles.

The National Shariah Advisory Council on Islamic Banking and Takaful have been set up at Bank Negara Malaysia (BNM) to advise BNM on the Shariah aspects of the operations of Islamic banking institutions and takaful operator, as well as of their product and services.

Takaful products and services

There are two types of takaful business:

Family takaful	General takaful
A combination of protection and long-term savings, usually covering a period of more than one year.	Protection on a short- term basis, usually covering a period of one year.
Provides financial benefits if you are inflicted by tragedy, as well as investment profits.	Provides protection for any loss or damage that may inflict your properties or belongings.
Risk covered: •        Premature death •        Illness and permanent disability •        Regular income during retirement	Risk covered: •        Property loss and damage •        Liability arising from damage caused by yourself to a third party •        Accidental death or injury to a third party
Periodic contribution payments- monthly, quarterly, semi-annually or annually.	One time contribution payment.
Main products: •        Ordinary family (mortgage, health, education and riders) •        Annuity (regular income during retirement) •        Investment-linked	Main products: •        Motor •        Fire/houseowners/householders •        Personal accident

Top 6 Basic principles of takaful

1.       You must have a legitimate financial interest in the subject matter to participate in a takaful plan.

2.       A takaful contract is based on the principle of utmost good faith (trust), whereby you need to disclose all materials information required.

3.       You can only recover your financial loss and not gain any profit as a result of a quantifiable loss.

4.       In determining the compensation, the takaful operator will identify the actual most important cause that brought about the loss.

5.       After you have been compensated for your loss, the takaful operator has the right to claim from any third party responsible for your loss.

6.       If a loss is covered by more than one takaful plans or insurance policies, the takaful operator that has made payment to you may call upon other takaful operators or insurance companies to contribute proportionately to the payment.

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