Takaful is a type of cooperative insurance based on Islamic principles which promote risk-sharing and mutual assistance within a community. Individuals are responsible for the protection of one another, so members contribute money into a shared pool to guarantee each other against loss or damage. Takaful certificates cover health, life, and general insurance needs.
Takaful offers an alternative to conventional commercial insurance by aligning with Shariah-compliant guidelines. Conventional insurance is not in alignment with Islamic principles due to its incorporation of elements of uncertainty, (al-gharar), is based on the concept and practice of charging interest (riba), and is considered a form of gambling (al-maisir).
With takaful, it is based on tabarru’, where a portion of the contributions into the fund are treated as charitable donations. This is why takaful participants are actually referred to as ‘participants’.
Takaful presents itself as an option for individuals seeking insurance that reflects their ethical principles. In this article, we’ll explore three basic concepts of takaful and how the Ouch! Pusara Pro certificate can provide comfort and support during difficult times.
3 Concepts of Takaful
Risk Sharing & Mutual Assistance
Risk sharing and mutual assistance is a core concept of takaful. With a conventional insurance policy, risk is transferred from the policyholder to the insurer. Takaful participants come together as a cooperative community for mutual protection against unforeseen losses or risks.
When an individual joins a takaful plan, they contribute to a pool of funds with other participants who share similar risks. These contributions serve as a collective pool from which claims are paid in case of a covered loss.
Solidarity plays a huge role in this system. Participants agree to help and support one another during times of need. This approach not only aligns with Islamic principles of cooperation and compassion but also fosters a sense of community and social responsibility. Participants who do not make any claims during a specific period may even be eligible for a surplus refund from the shared pool – reinforcing the idea of fairness and equitable distribution of resources.
Shariah Compliance
Shariah compliance is another fundamental concept of takaful. Shariah is the Islamic legal framework derived from the Quran and Hadith, guiding Muslims in various aspects of life, including financial matters. Takaful adheres to these principles to ensure that operations and investment activities are in accordance with Islamic guidelines.
Some key Shariah principles applied in takaful include:
- Prohibition of Interest (Riba): Takaful models avoid investing in interest-based instruments, as they are considered usurious and exploitative.
- Avoidance of Uncertainty (Al-Gharar) & Gambling (Al-Maisir): Takaful contracts are designed to be free from excessive uncertainty and ambiguity, ensuring that risks and returns are clearly defined.
- Prohibition of Investing in Unethical Activities: Takaful operators refrain from investing in businesses involved in activities deemed unethical or harmful to society, such as alcohol, gambling, and tobacco.
- Moral & Ethical Considerations: Takaful models encourage ethical practices and responsible behaviour in both the insurance and investment aspects of the business.
Separate Participant & Shareholder Accounts
In takaful, the funds contributed by participants are kept separate from the company’s funds. This ensures transparency and prevents any mingling of participants’ contributions with shareholders’ assets. The company manages two distinct accounts: the Participant Takaful Fund and the Shareholder Fund.
The Participant Takaful Fund is where participants’ contributions are collected; from here, claims and other policy-related expenses are paid. Any surplus generated from this fund after meeting all obligations is shared among the participants, fostering the principle of equitable distribution.
The Shareholder Fund, on the other hand, is used to cover operational expenses and generate profits for the company. Takaful operators may charge a Wakalah (‘protection’) fee for managing the takaful operations, and retain any surplus generated from the Shareholder Fund.
By maintaining separate accounts, takaful ensures transparency and prevents any potential conflicts of interest, reinforcing the cooperative and ethical nature of the system.
Is Pusara Pro by Ouch! a Takaful?
Yes, Pusara Pro is a takaful certificate. It offers compassionate claim benefits during personally and emotionally difficult times. It is based on the Islamic takaful concept of Khairat Kematian. This helps cover funeral expenses for the participant, which are paid directly to the family of the deceased. To top it off, death benefits from the sum covered chosen by the participants will help to provide financial assistance to the beneficiaries after their passing.
Under the Pusara Pro policy, beneficiaries can claim 10% EXTRA from the Total Sum Covered within just 24 hours. It’s simple, easy to understand, and very accessible, with effortless document submission within the Ouch! mobile app. It’s also very affordable – up to 20% more affordable than similar coverage available through other providers.
No one likes to think about a death in the family. But with the right coverage that is ethically, morally and religiously compliant, bereavement can be a little easier to handle.
Find out more about Pusara Pro by by clicking here or download the Ouch! Takaful & Insurance app from the Google Play Store or Apple App Store today.
Disclaimer:
Please be aware that the information presented within our blog articles and/or by our esteemed brand ambassadors/KOLs is intended solely for the purpose of providing general insights. It should not be construed as legally binding in any manner. While we strive to maintain accuracy and currency, we do not guarantee the completeness, reliability, or suitability of the information shared.
For matters requiring legal validity or formal confirmation, we strongly advise referring to official certificates, authorized documentation, or pertinent sources. To ensure clarity and obtain authoritative guidance, please consider reaching out to an authorized Ouch! representative through our established communication platforms.