Just like any conventional motor insurance, motor Takaful insurance also works on the same concept – that would be providing coverage to vehicles.
However, they differ in the principles that they stand by. Both protect the insured, but Takaful is Shariah-compliant. They exist as a replacement for the ‘halal’ version of conventional insurance for Muslims.
It is possible that many people are still unfamiliar with the Takaful concept. There might be some Islamic terms that make it confusing to understand. Take a breath if you are one of them because it is not as complicated as it may seem.
Let us explain and answer some questions that you may have in mind about Takaful in this article.
What is Motor Takaful?
Motor Takaful commonly referred to as Islamic insurance is a motor insurance plan that complies with the Shariah (Islamic) law and principles. In particular, motor takaful plans are free from prohibited Islamic principles which are:
- Riba’ (interest)
- Maysir (gambling)
- Gharar (uncertainty)
What are the key features of Takaful?
How does Motor Takaful work?
In conventional insurance, the risk is transferred from the insured to the insurer. Takaful, on the other hand, is based on shared risk. Each participant donates to a Takaful fund; in the event of loss, the participant will receive the amount of their claim.
Subsequently, Takaful participants retain an ownership interest in the fund. Contributions from the participants are later invested into Sharia-compliant funds to derive investment income.
If the fund generates a surplus, it will be shared among the participants and the Takaful operator (in some cases). Hence, this creates a ‘win-win’ situation for all participants.
What are the key differences between Takaful and conventional insurance?
What is Surplus Sharing in Takaful?
Surplus refers to the excess of contributions over claims, plus investment return. Surplus sharing refers to the act of distributing the excess made among the participants of the Fund.
What does Takaful cover?
A motor Takaful plan provides coverage against loss or damage to your own vehicle due to accidental
fire, theft or accident; and/or third party bodily injury or death, third party property loss or damage.
In general, there are two types of cover under the motor takaful plan which are the third party policy and comprehensive policy.
- Third party policy protects you against the third party’s death, bodily injury and/or property damage.
- Comprehensive policy protects you against the third party’s death, bodily injury and/ or property damage, and loss and/or damage to your vehicle due to accidental fire, theft or an accident.
Can the non-Muslims purchase Motor Takaful?
Takaful isn’t a religious product and it is available to everyone, including non-Muslims. Therefore, non-Muslims, too, can purchase takaful products without any worry. It is based on a cooperative concept that is beneficial to all members of the society without any discrimination based on ethnicity, creed, or colour.
Why is conventional insurance not permissible in Islam?
Conventional insurance may have the elements prohibited in Islam which are Riba’ (interest), Maysir (gambling), and Gharar (uncertainty). Muslims, must seek what is halal and comply with the teaching of Islam.
What is Gharar (Uncertainty)?
This is total uncertainty, or risk. Gharar exists since there is an uncertainty of what the insurance policyholder is “buying” or paying for if no loss occurs and the policyholder receives nothing.
What is Maysir (Gambling/Speculation)?
This is gambling or games of chance. Maisir is present because the payment of the sum insured depends on pure chance.
What is Riba (Interests)?
This is what is known as interest in conventional finance. It comes into play when funds are invested in interest-bearing securities.
Where can I purchase my Takaful plan?
You may visit Bjak’s website to get more comprehensive options for Takaful plans. Bjak offers up to four leading Takaful brands in Malaysia for you to compare.
For example, Etiqa Takaful, Takaful Malaysia, Takaful Ikhlas and Zurich Takaful.
Bjak is one of Malaysia’s biggest insurance comparison websites, offering policies from over 10 brands. Get your free insurance quote from Bjak today!
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