Takaful

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

The spirit of sharing coupled with a sincere intention is strongly recommended in Islam based on the following hadiths:- “ The attitude of the believer and feeling of brotherhood to one another is like that of a single body. When one member of the body is hurt, it will have an effect to the whole body” “ Each one of you has a responsibility and each one of you is responsible towards those under your responsibility.” (Reported by Bukhari and Muslim)

Differences Between Conventional insurance and Takaful First, insurance is a transfer technique whereby the insured (customer) transfers the risk of financial loss to another party which is the insurance company. Second, it is a contract between the policyholder and the insurer that states what the consequences of loss are transferred and expresses the insurer’s promise to pay for those consequences.

Differences Between Takaful & Conventional insurance Third, the contract of insurance involve uncertainty (gharar) as the policy holder is paying premium for an event which is unknown such as accident and death. These events are also speculative (maisir) Fourth, there is an element of usury (riba) in insurance as money is being exchanged with money in a buying and selling contract. Policy holder/beneficiary will obtained the promised return (cash value) and the accumulated interest. Premium collected is invested in riba based transactions.

Tabarru’ differentiates takaful from insurance Tabarru’ is an Arabic noun that means “ donation; gift; contribution”. Under takaful, part of the contributions from every participants must be with made with the intention of tabarru’ and not for buying/selling. The existence of tabarru’ makes the transaction permissible and valid according to the Shariah.

Mudharabah replaces interest The contract of takaful uses Mudharabah (profit sharing) as its operating principle and does not predetermined interest to be paid to the policy holder/interest up front. The takaful company acts as mudharib and accepts the contributions from the participants. As the entrepreneur, the takaful company will manage various takaful funds and 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 takaful company.

Islamic Investment Plan Family Takaful Plan for Education Takaful Graduate Plan

Family Takaful 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.

Family Takaful Plan for Education 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.

Takaful 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.

Takaful 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.

Takaful Graduate Plan Scopes of Cover - Covering cost of education at tertiary level Death Permanent and Total Disablement Personal Accident As trustee: Permanent and Total Disablement. Supplementary Cover Medical or Hospitalization Benefit Family Rider

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 ? - 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 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 9.9% 31-35 2.8% 5.0% 7.2% 36-40 6.6% 41-45 9.4% 46-50 7.7% 51-55

Example of the proceeds payable under 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 Permanent Accident 25,000 -

Conclusions 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