The meaning of Takaful
In the Arabic context, the term “Takaful” is derived from the word “Kafala” which means to guarantee, guard and protect. Takaful means “guaranteeing each other”. In the Islamic interpretation, takaful is a pact among a group of members or participants that agree to always give mutual assistance to one another.
This coincides with Rasulullah Sallallahu `Alaihi Wassalam’s hadith:
والله في عون العبد ما كان العبد في عون أخيه
Rasulullah Sallallahu `Alaihi Wassalam said: “And Allah supports and assists a person as long as he assists and helps other fellow men” (Hadith by Imam Muslim)
The purpose of Takaful?
Takaful system is a system of mutual cooperation and mutual assistance protection based upon the Quranic principles of “At-Ta’awuni”, and it is a channel that can allow an individual to make an initiative to HELP ONE ANOTHER TO FACE AND SHARE RISKS TOGETHER with PROVIDING BENEFITS TO EASE FINANCIAL BURDEN BETWEEN THEM.
What are the characteristics that differentiate between Takaful and conventional insurance?
- Has elements of `IBADAH
- Has element of TA`AWUN (Mutual Cooperation
- Has elements of TABARRU’ (Aim of Sincere Donation)
- No elements of RIBA’ (Interest Usury)
- No elements of MAISIR (Gambling)
- No elements of GHARAR (Uncertainty)
- Sharing of investment Profit (Al-Mudharabah)
- Distribution of net surplus on Hibah basis (Gift)*