Sunday, April 6, 2008

Family Takaful and General Takaful

Two areas of business
Most Takaful products fall into two main areas.

General Takaful
General Takaful refers to schemes designed to meet the protection needs of individuals and corporate bodies in relation to material loss or damage resulting from a catastrophe or disaster inflicted upon properties, assets or belongings.

Participants (policyholders) pay their premiums (calculated by actuaries) into the Takaful fund as a Tabarru’ (donation). This will eliminate the elements of al Gharar and gambling. That is, the participant agrees to donate their contribution (premium) to the fund with a mission to help other participants covered under the various Takaful schemes when in distress.

Therefore, it is the members who carry the risk and the Takaful operator is merely a custodian. Mudharabah, Musharakah and Wakalah models (see Types of Takaful Contracts ) can be implemented under this approach.

Family Takaful
The range of Takaful products offered falls into two categories:

1. Risk-type products that are provided for the protection of the participants; and

2. Investment-type products with an element of risk.

These products tend to be regular savings plans where a participant indicates his need to achieve a target lump sum by a specified time in the future. Under this scheme the participants pay their premiums into the Takaful fund. A portion of the premium is allocated purely for savings and investment, and the balance goes as a Tabarru’ to build up reserves (claims reserves, unearned premium reserves and so on), to direct expenses, and to pay for Retakaful (reinsurance).

Again, Mudharabah, Musharakah and Wakalah models can be implemented under this approach.

Beyond these two main areas, Takaful products are also available for health and pensions needs.

It should be noted that Takaful insurance is not just for Muslims but also for non-Muslims, as it is seen by them as an ethical form of insurance.