Takaful Meaning

As per the Takaful definition, it refers to a special form of Islamic insurance in which the members are known to contribute a specific amount of money to the given pool system for guaranteeing each other against some form of damage or loss. Insurance that tends to be Takaful-branded has been based on sharia –Islamic religious laws, for explaining how individuals tend to be responsible for cooperating and protecting one another. Policies related to Takaful insurance are helpful in covering life, general, and health insurance requirements.

Companies Offering Takaful insurance policies have been introduced to serve as the alternative to policies involved in the commercial insurance Industry –the policies that might be going against Islamic restrictions on principles related to al-maisir (gambling), riba (interest), & al-gharar (uncertainty). All of these principles are outlawed in the concept of sharia.

Getting an Understanding of Takaful

All policyholders or parties involved in the Takaful arrangement are known to agree towards guaranteeing each other while making contributions to some Mutual Fund or pool rather than paying premiums. The pool featuring the collected contributions helps in creating the respective Takaful fund. The contribution of every participant in the pool is dependent on the coverage type as required by them along with the respective personal conditions.

A Takaful contract is helpful in specifying the overall risk’s nature along with the coverage’s length –quite similar to the traditional insurance policy. It is known to be managed as well as administered on the participants’ behalf by some Takaful operator. The operator is known to charge some free that has been agreed-upon for covering the overall costs. Just like some traditional insurance company, the overall costs are known to include underwriting, sales & marketing, and also claim management.

If a claim has been made by the participants, the same gets paid out of the respective Takaful fund. Moreover, if there are remaining surpluses, after putting forth the provisions for the expected cost of upcoming claims along with other reserves, then these are known to belong to the fund’s participants, and not to the operator of the Takaful fund. The given funds might be distributed to the involved participants in the form of cash distributions or cash dividends, or with the help of the reduction in upcoming contributions.

A Takaful insurance firm that might be operating the respective Takaful fund is expected to operate under the principles as mentioned below:

• Operating as per the Islamic cooperative laws or principles
• A reinsurance commission might be only paid out or received from to Islamic reinsurance and Insurance companies
• The given insurance company is expected to maintain two funds separately –a policyholder and participant fund and the shareholder fund.

As per the recent study reports by Research & Markets, the global Market for Takaful insurance is growing rapidly.