Monday, September 1, 2008

Takaful (Islamic Insurance)

Takaful

From Wikipedia, the free encyclopedia


Takaful ( التكتاقل) is an Islamic insurance concept which is grounded in Islamic muamalat (banking transactions), observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years. [1] Muslim jurists acknowledge that the basis of shared responsibility in the system of aquila as practised between Muslims of Mecca and Medina laid the foundation of mutual insurance. Islamic insurance was established in the early second century of the Islamic era when Muslim Arabs expanding trade into Asia mutually agreed to contribute to a fund to cover anyone in the group that incurred mishaps or robberies along the numerous sea voyages (marine insurance).[citation needed]


The term takaful originates the from Arabic word Kafalah, which means "guaranteeing each other" or "joint guarantee". In principle, the Takaful system is based on mutual co-operation, responsibility, assurance, protection and assistance between groups of participants.[citation needed] It is a form of mutual insurance.

Islamic References to Takaful

These fundamentals are based on the sayings of the Islamic prophet Mohammed. Based on the hadith and Quranic verses mentioned below, Islamic scholars had decided that there should be a concerted effort to implement the Takaful concept as the best way to resolve these needs. Some of the examples are:

  • Basis of Co-operation Help one another in al-Birr and in al-Taqwa (virtue, righteousness and piety): but do not help one another in sin and transgression. (Surah Al-Maidah, Verse 2)[2]
  • Allah will always help His servant for as long as he helps others. (Narrated by Imam Ahmad bin Hanbal and Imam Abu Daud)
  • Basis of Responsibility The place of relationships and feelings of people with faith, between each other, is just like the body; when one of its parts is afflicted with pain, then the rest of the body will be affected. (Narrated by Imam al-Bukhari and Imam Muslim)
  • One true Muslim (Mu’min) and another true Muslim (Mu’min) is just like a building whereby every part in it strengthens the other part. (Narrated by Imam al-Bukhari and Imam Muslim)
  • Basis of Mutual Protection By my life, which is in Allah’s power, nobody will enter Paradise if he does not protect his neighbour who is in distress. (Narrated by Imam Ahmad bin Hanbal)

“The basic fundamentals underlying the Takaful concept are very similar to co-operative and mutual principles, to the extent that the co-operative and mutual model is one that is accepted under Islamic Law."

Principles of Takaful

The principles of Takaful are as follows:

  • Policyholders co-operate among themselves for their common good.
  • Every policyholder pays his subscription to help those that need assistance.
  • Losses are divided and liabilities spread according to the community pooling system.
  • Uncertainty is eliminated in respect of subscription and compensation.
  • It does not derive advantage at the cost of others.

Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of "bear ye one another's burden." Commercial insurance is strictly not allowed for Muslim as agreed upon by most contemporary scholars because it contains the following elements: i) Al-Gharar (Uncertainty) ii) Al-Maisir (Gambling) iii) Riba (Interest)

There are three (3) models and several variations on how takaful can be implemented.

  1. Mudharabah Model
  2. Wakalah Model
  3. Combination of both

The Mudharabah Model (Profit Sharing)

By this principle, the entrepreneur or al-Mudharib (takaful operator) will accept payment of the takaful installments or takaful contributions (premium) termed as Ra's-ul-Mal from investors or providers of capital or fund (takaful participants) acting as Sahib-ul-Mal. The contract specifies how the profit (surplus) from the operations of takaful managed by the takaful operator is to be shared, in accordance with the principle of al-Mudharabah, between the participants as the providers of capital and the takaful operator as the entrepreneur. The sharing of such profit may be in a ratio 50:50, 60:40, 70:30, etc. as mutually agreed between the contracting parties.

In order to eliminate the element of uncertainty in the takaful contract, the concept of tabarru (to donate, to contribute, to give away) is incorporated. In relation to this a participant shall agree to relinquish as tabarru, certain proportion of his takaful installments or takaful contributions that he agrees or undertakes to pay thus enabling him to fulfill his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss.

In essence, tabarru would enable the participants to perform their deeds in sincerely assisting fellow participants who might suffer a loss or damage due to a catastrophe or disaster. The sharing of profit or surplus that may emerge from the operations of takaful, is made only after the obligation of assisting the fellow participants has been fulfilled. It is imperative, therefore, for a takaful operator to maintain adequate assets of the defined funds under its care whilst simultaneously striving prudently to ensure the funds are sufficiently protected against undue over-exposure. Therefore the provision of insurance cover as a form of business in conformity with Shariah is based on the Islamic principles of al-Takaful and al-Mudharabah.

Al-Hari Rayais the pact among a group of people, called participants, reciprocally guaranteeing each other; while Al-Mudharabah is the commercial profit-sharing contract between the provider or providers of funds for a business venture and the entrepreneur who actually conducts the business. The operation of takaful may thus be envisaged as the profit-sharing business venture between the takaful operator and the individual members of a group of participants who desire to reciprocally guarantee each other against a certain loss or damage that may be inflicted upon any one of them.

11 comments:

Anonymous said...

It's amazing to pay a quick visit this web site and reading the views of all mates regarding this article, while I am also eager of getting experience.
my web site: teenpornsexpussy.com

Anonymous said...

I like the helpful info you provide in your articles.
I'll bookmark your blog and check again here regularly. I am quite certain I will learn lots of new stuff right here! Best of luck for the next!
my webpage :: free teen porn

Anonymous said...

Thanks for sharing such a good thought, article is fastidious, thats why i have
read it entirely
Feel free to surf my webpage ... vidacup reviews

Anonymous said...

We absolutely love your blog and find a lot of
your post's to be what precisely I'm looking for. Do you offer guest
writers to write content for you? I wouldn't mind publishing a post or elaborating on a number of the subjects you write with regards to here. Again, awesome weblog!
Here is my homepage ; cs

Anonymous said...

Unquestionably believe that which you stated. Your favorite
justification seemed to be on the web the
simplest thing to be aware of. I say to you, I definitely get annoyed while people consider
worries that they just don't know about. You managed to hit the nail upon the top and also defined out the whole thing without having side effect , people could take a signal. Will likely be back to get more. Thanks
My blog : The Tao of Badass

Anonymous said...

Hi i am kavin, its my first occasion to commenting anywhere,
when i read this piece of writing i thought i
could also create comment due to this good post.
Also visit my website cheap iPhone 5 for sale online

Anonymous said...

Quality articles is the important to attract the viewers to pay a
quick visit the website, that's what this site is providing.

Also visit my webpage ... ironmaster adjustable dumbbells
My page :: adjustable dumbbells reviews

Anonymous said...

Very soon this website will be famous amid all blogging and site-building people, due
to it's good articles

My blog Resort Management Association

Anonymous said...

Hello it's me, I am also visiting this site on a regular basis, this site is in fact fastidious and the visitors are actually sharing pleasant thoughts.

Feel free to visit my webpage ... wildpartygirls.org

Anonymous said...

Hello, Neat post. There's a problem along with your site in web explorer, might check this? IE still is the market leader and a big component of people will miss your great writing because of this problem.

Stop by my webpage :: http://www.xxxsexymilfs.com/punishment-anal-for-milf-lisa-ann-punis/

Anonymous said...

Magnificent beat ! I wish to apprentice while you amend your website, how could i
subscribe for a blog website? The account aided
me a acceptable deal. I had been a little bit acquainted of this your
broadcast provided bright clear concept

My homepage: free sex vitios

Bait-bait Mu'jizat