Insurance is a legal agreement between two parties-the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that she/he bear under certain circumstances. An arrangement by which a country or the state undertakes to provide a guarantee of compensation for specified loss, damage illness, or death in return for payment of a specified premium.
The word ‘’ TAKAFUL’’ is derived from the Arabic word Kafala, which means to guarantee one another; to help; to take care of one’s need; a scheme based on brotherhood, solidarity and mutual assistance which provides for mutual financial aid and assistance to the participants in case of need whereby the participants mutually agree to contribute for the purpose.’’ (Takaful Act 1984)
Based on the principle of ta’awun (mutual assistance) and tabarru (voluntary contribution).The operation of the concept must be within the spirit of shariah.
Glimpses from the Life of Syed Rafique Hussain
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 and in the event of loss, the participant will receive the amount of its claim.
Both insurance policies and takaful cover the same range of products including house, car, life, personal accident, medical and more. The only difference would be that a takaful plan may extend to include Islamic obligations such as travel and medical coverage for Hajj and Umrah.
Insurance is based on the commercial factor, and follow by government laws. Its principle is based on the purchase agreement and its payment is premium. In this their application eligibility is anyone can apply. In this risk is absorbed by the company. It includes fixed commission rate on the other hand profit are giving to the shareholder. In this no surplus is shared.
Takaful is based on mutual cooperation among takaful participants based on Wakalah contract between participants and the takaful operator. It is followed by Shariah laws and government laws. It is based on the tabarru (donations) and its payment is contribution. In this their application eligibility is anyone can apply. Risk is shared between participants. It may include wakalah fee that will reduce over time. Profits are shared between participants and the takaful operator based on the Mudarabah contract.
Rahmanullah Gurbaz scores half-century as Sharjah Warriors defeat Abu Dhabi Knight Riders
The general insurance sector of Pakistan, operating with approximately 28 insurance companies, falls under the services sector of the economy. AICL started its operations on 28th September 1960 and currently, it is considered to be the largest general insurance company in Pakistan.
The insurance sector of Pakistan comprises of 10 life insurers and family takaful companies, 30 active non-life insurers and general takaful companies. The share of Takaful in Pakistan`s in global takaful premium is estimated to be around 1% which is very small as compared with other countries like Malaysia, Indonesia USA.
The first takaful company to operate in Pakistan was Pak - Kuwait Takaful Company Limited, which began its takaful operations in the year 2005. Whereas, currently there are five Takaful operators.
Takaful and insurance are very important as they perform the essential function of providing a financial safety net in the event something unexpected happens to us, such as developing a critical illness getting into an accident, incurring loss or property or even death. To put it generally, Takaful is like an Islamic insurance. However Takaful is fundamentally different from insurance in its principles and how it operates.
Govt announces holiday in Islamabad on Jan 30 upon UAE president's arrival
Insurance does not only protect risks but it provides an investment channel too. Life insurance provides a mode of investment. The insurance develops a habit of saving money by paying premium. The amount of policy is paid to the insured or to his nominees. The Income replacement for years of lost salary. It’s paying off your home mortgage. Paying off other debts, such as car loans, credit cards, and student loans. It providing funds for your kids college education. It helps with other obligations, such as care for aging parents. Insurance covers business property and it protects against liabilities, replaces income.
Insurance has many terms and conditions. Insurance covers not all losses in a person’s life or business situation, long and costly legal procedures, fraud agency, its not for all people. Its potential criminal activity is Increases Cost. It charged the additional fees, professionalism gap. It adds expenses and denies claims or pays slowly.
The main advantage of takaful over conventional insurance is that it is free from religiously forbidden elements and promotes a spirit of caring and sharing in the society. This knowledge should be disseminated to ensure that Takaful becomes the universal ethical insurance product.
People welcoming Maryam 'without party's call' proves nation's choice: Marriyum Aurangzeb
There are more advantages of Takaful than disadvantages.
Both Takaful and conventional insurance protect in the event of unforeseen events .Participants make contributions to start the coverage. For both policies, the insured must have a legitimate financial interest in the risk. This means that the participants must suffer a financial loss when the insured event occurs.
Takaful is not a new concept it has been around for centuries. Takaful business allows policyholders to enjoy the benefits of a mutual structure within a shareholder wrapper. Takaful business also has an explicit ethical structure which can be marketed to both Muslims and non-Muslims. Although both conventional and takaful business generate profits for the shareholders are explicitly transparent- in conventional insurance they are not necessarily so.
The writer is a student of BBA at Hailey College, University of the Punjab.