TakafulTakaful

Philosophy of TakafulPhilosophy of Takaful

The philosophy of The philosophy of takaful takaful is based on the spirit is based on the spirit of mutual responsibility, co-operation and cover in of mutual responsibility, co-operation and cover in social activities for the well-being of the people social activities for the well-being of the people

and solidarity of the society.and solidarity of the society.

The spirit of sharing coupled with aThe spirit of sharing coupled with asincere intention is strongly recommended in sincere intention is strongly recommended in

Islam based on the following hadiths:-Islam based on the following hadiths:-

““ The attitude of the believer and feeling ofThe attitude of the believer and feeling ofbrotherhood to one another is like that of a singlebrotherhood to one another is like that of a single

body. When one member of the body is hurt, itbody. When one member of the body is hurt, itwill have an effect to the whole bodywill have an effect to the whole body””

““ Each one of you has a responsibility and each one Each one of you has a responsibility and each oneof you is responsible towards those under yourof you is responsible towards those under your

responsibility.responsibility.””

(Reported by Bukhari and Muslim)(Reported by Bukhari and Muslim)

Differences Between Differences Between Conventional insurance and Conventional insurance and TakafulTakaful

First, insurance is a transfer technique whereby the insured First, insurance is a transfer technique whereby the insured (customer)(customer) transfers thetransfers the risk of financial loss to another risk of financial loss to another

party which is the insurance company.party which is the insurance company.

Second, it is a contract between the policyholder Second, it is a contract between the policyholder and the insurer that states what the consequences of loss areand the insurer that states what the consequences of loss are

transferred and expresses the insurertransferred and expresses the insurer’’s promise to pay for those s promise to pay for those consequencesconsequences. .

Differences Between Takaful & Differences Between Takaful & Conventional insurance Conventional insurance

Third, the contract of insurance involve uncertainty (Third, the contract of insurance involve uncertainty (gharargharar) as the) as the

policy holder is paying premium for an event which is policy holder is paying premium for an event which is unknown such as accident and death. These unknown such as accident and death. These

events are also speculative ( events are also speculative (maisirmaisir))

Fourth, there is an element of usury ( Fourth, there is an element of usury (riba) riba) in insurancein insurance as as

money is being exchanged with money in a buying and selling contract. money is being exchanged with money in a buying and selling contract. Policy holder/beneficiary will obtained the Policy holder/beneficiary will obtained the

promised return (cash value) and the accumulated interest.promised return (cash value) and the accumulated interest.Premium collected is invested in Premium collected is invested in riba riba basedbased

transactions.transactions.

TabarruTabarru’’ differentiates differentiates takafultakaful from insurance from insurance

TabarruTabarru’’ is an Arabic noun that means is an Arabic noun that means ““ donation; gift; contribution donation; gift; contribution””. Under . Under takaful, takaful, part of the contributions from every participants must be with part of the contributions from every participants must be with

made with the intention of made with the intention of tabarrutabarru’’ and not for and not for buying/selling. The existence of buying/selling. The existence of tabarrutabarru’’ makes the makes the

transaction permissible and valid according to the transaction permissible and valid according to the ShariahShariah. .

Mudharabah Mudharabah replaces interestreplaces interest

The contract of The contract of takafultakaful uses uses Mudharabah (Mudharabah (profit sharing)profit sharing) as its operating as its operating principle and does not predetermined interest to be paid to the principle and does not predetermined interest to be paid to the

policy holder/interest up front. policy holder/interest up front.

The The takaful takaful company acts as company acts as mudharib mudharib and accepts the contributions from the participants. As theand accepts the contributions from the participants. As the

entrepreneur, the entrepreneur, the takaful takaful company will manage various company will manage various takaful takaful funds and funds and investment activities. The profit sharing ratio can be in any proportion (eg. investment activities. The profit sharing ratio can be in any proportion (eg.

70:30 or 60:40) but must be agreed upon between the customer and 70:30 or 60:40) but must be agreed upon between the customer and takaful takaful

companycompany. .

Islamic Investment PlanIslamic Investment Plan

Family Takaful Plan for Education Takaful Graduate Plan

Family Family TakafulTakaful Plan for Education Plan for Education

Basic Features

– It is regular and easy savings scheme which can be used as old-age benefit or your child's scholarship fund in case of your untimely death.

– Customer will enjoy income tax relief on the payment of takaful contribution.

– Attractive returns, based on the profit-sharing of Mudharabah. – Flexible maturity period (10 to 40 years) – Supplementary cover for hospitalization benefits, personal

accident, permanent disability or family rider. – Low contribution i.e. RM15.00 per month.– Part-withdrawal facility of up to 70% of the balance of savings.

Objectives

– To save regularly towards accumulating customer own scholarship fund which would finance their children's’ future education.

– As a savings programme to benefit the child in case of untimely death before the maturity period.

– An assurance to help customer through with any financial tide in case of mishap such as accident, permanent disability or to finance hospitalization bills.

Family Family TakafulTakaful Plan for Education Plan for Education

TakafulTakaful Graduate Plan Graduate Plan Basic Features

– A simple and regular savings plan to benefit child's education upon entry into institute of higher education.

– Parent act as the trustee to guarantee the regular payment of the takaful installment during the period of participation.

– The contribution that he/ she pays regularly together with returns on the investment will accumulate into family scholarship fund. Proceeds from the fund can later be spent towards the cost of child's future tertiary education.

– Contribution need only be paid up to age of 18 years.

TakafulTakaful Graduate Plan Graduate Plan Basic Features

– Maturity period when participant reaches 22 years old.

– Scholarship or Funding of Education upon entry at 20% a year.

– Open to children up to 18 years.

– Contribution is from RM10 to RM300 per month.

– Attractive returns, based on the profit sharing principles of Mudharabah.

TakafulTakaful Graduate Plan Graduate Plan

Scopes of Cover

- Covering cost of education at tertiary level – Death – Permanent and Total Disablement – Personal Accident

As trustee: – Death – Permanent and Total Disablement.

Supplementary Cover– Personal Accident – Medical or Hospitalization Benefit – Family Rider

How is profit realized ?How is profit realized ?

Each takaful contribution will be credited in the Family Takaful Fund which is divided into:-

(i) Participant's Account (PA) and (ii) Participants' Special Account ( PSA).

A substantial proportion of the installment shall be credited into the PA solely for the purpose of savings and investment.

The balance of installments is credited into the PSA as tabarru’ (donation) for the takaful company to pay the benefits to their heir(s) or beneficiary.

How is profit realized ?How is profit realized ?

- Both the PA and PSA shall be invested by the Company and

returns on the investment (if any) shall be shared according to the Mudharabah principle (70% participant/ 30% Company).

- The participant's share of profit (70%) shall be credited into his PA and PSA accordingly.

Example :Distribution of ContributionExample :Distribution of Contribution

Assuming the profit rate is 6% per annum and based on monthly installment of RM100 from the 1st. year of customer’s child age. Assuming he/she is 30 years old upon participation in this plan.

Tabarru' rates for the Participants' Special Accounts (PSA): The tabarru' rates which is credited into the PSA is for Death &

Permanent Total Disability (TPD)

Age       

Maturity Period

  10 15 20 25 30 35 40

18-25 2.2% 3.9% 5.5% 6.1% 8.3% 10.5% 13.8%

26-30 2.2% 3.9% 5.5% 6.1% 9.9% 13.8%

31-35 2.8% 5.0% 7.2% 9.9% 13.8%

36-40 3.9% 6.6% 9.9% 13.8%

41-45 5.5% 9.4% 13.8%

46-50 7.7% 13.8%

51-55 13.8%

Example of the proceeds payable Example of the proceeds payable under the planunder the plan

Given: Monthly installment = RM 50 Child’s age = 12 years old Maturity Age = 18 years old

Participant Guardian

Death 1,000 + Participant's Account (PA)

1,000 + 50 * monthly

= 1,000 + 50 * 6 * 12

= 4,600

Permanent

Disability

1,000 1,000 + 50 * monthly

= 4,600

Permanent Accident 25,000 -

ConclusionsConclusions

Children are our responsibility from Allah

Education restores one’s true nature of khalifah

Takaful is the means of transferring risks which is allowed by the Shariah.

Takaful enables a Muslim to cover one’s risk and at the same time invest and save based on the principles allowed by the Shariah.

WA ALLAH A’LAM

THANK YOU