Takaful in Arabic means “Joint Guarantee”This is a savings plan that has basic life cover. It provides potential policyholders the maximization of medium or long term savings. It provides a tax free lump sum at the end of the selected policy duration of the plan.
Scriptural perspective on the basis of protection and risk management in Takaful
Basis of Cooperation
Takaful arrangements give every Muslim the opportunity to practice the virtues of Islam…. including self-purification.
“Help one another in Al-Birr and A-Taqwa (virtue, righteousness and piety): but do not help one another in sin and transgression” (Surah Al-Maidah, 5:2)
“Whoever removes a worldly hardship from a believer, Allah will remove from him one of the hardships of the hereafter. Whoever alleviates the needy person Allah will alleviate from him his needs in this world and the next” (Translation of Sahih Muslim, Book 32No.6250)
Basis of Responsibility
The places of relationships and feelings of people with faith, between each other is just like the body; when one of its part is afflicted with pain, then the rest of the body will be afflicted (Narrated by Imam Al-Bukhari and Imam Muslim book 32).
“By my life, which is in Allah’s power, nobody will enter paradise if he does not protect his neighbor in distress” (Narrated by Imam Al-Bukhari and Imam Ahmad Ibn Hambal).
Basis of Protection/Risk Management
“The prophet (SAW) noticed a Bedouin Arab leaving his camel and he ask the Bedouin, ‘why don’t you tie the camel?’ The Bedouin answered, ‘I put my trust in Allah’. The prophet said, ‘Tie the camel first, then put your trust in Allah’ (Naratted by Al-Tirmidhi and Ibn Majah, Book 60, No 2517).
“The Holy Prophet said: ‘It is better for a believer to have his/her offspring’s wealthy than to leave them poor asking other for help” (Sahih Al-Bukhari, (trans. Eng), Khan, Muhammad Mohsin, Vol. 8. No. 725, pp. 477).
What is Takaful?
Takaful is a policy of mutual co-operation, solidarity, common interest, shared responsibility, joint indemnity and brotherhood against unpredicted risk or catastrophes, in which the participants involved are expected to contribute genuinely.
Takaful in Arabic means “Joint Guarantee”. It provides policy holders the self discipline for savings and investment and encourages the habit of sound financial planning to take care of themselves and the needs of their children and families.
FAMILY TAKAFUL BUSINESS
Family Takaful Plans are designed to serve the requirements of both the individuals, groups and corporate sectors. A Family Takaful Plan is an ethical insurance product that combines long-term savings, investment, and financial protection meant to cater for future contingency needs.
Objective of Family Takaful Plans
To save regularly for a fixed period with a view of creating a contingency fund for future needs such as retirement, children education, Hajj etc.
To invest with a view of earning profits in a manner acceptable to the principle of shariah, this in turn will lead to further accumulation of savings.
To obtain cover in the form of mutual financial aid from payment of Takaful benefits to the heir(s) should a participant die before the maturity of his Takaful Plan.
Takaful operations is confined within the ‘tijari’ commercial sector which is subject to the Islamic contractual laws in compliance with the Shariah. The contract of Al-Mudarabah is based on the principle of Islamic commercial profit/loss sharing.
By this principle the Takaful operator (African Alliance) will accept payment of Takaful installments or Takaful contributions (Ra’s-ul-mal) from the participants (acting as Sahib-ul-mal).
The operator (African Alliance) will invest the contributions and profit generated will be shared on a pre-agreed ratio (60:40)
Tabaru as a principle eliminates the element of uncertainty as found in the conventional insurance.
“Tabarru” means to donate, to contribute, or to give away.
Each participant donates part of his contribution to assist other participants who may suffer a defined loss.
It fulfills the Islamic injunction which says: “Sustain in co-operation among yourselves in righteousness and piety”. Quran (5:2)
Family Takaful Fund
Contributions are divided into two accounts in relation to the above principles:
Participant’s Account PA (Mudarabah Account)
Participant’s Special Account PSA (Tabaru Account)