TAKAFUL

Takaful in Arabic, means joint guarantee. Thus it can be visualised as a pact among a group of members or participants who agree to jointly guarantee among themselves against loss or damage that may inflict upon any of them as defined in the pact. Should any member or participant suffer a catastrophe or disaster he would receive a certain sum of money or financial benefit from a fund, as also defined in the pact, to help him meet the loss or damage.
In other words, the basic objective of takaful is to pay for a defined loss from a defined fund. Each member of the group pools effort to support the needy. It means mutual help among the group.
As an insurance system, we are to confine the operation of takaful within the `Tijari' (commercial) sector or popularly known as the private sector. Thus the transactional aspect of the commercial activitiy of Takaful must be subject to the Islamic contractual laws in order to ensure its compliance with the Shariah. Within this fundamental framework the contract of `tijari' takaful is therefore based on the Islamic commercial profit-sharing principle of al-Mudharabah.

Takaful is an insurance concept which is grounded in Islamic Muamalat, observing the rules and regulations of Shariah. It is a concept that has been in practice for over 1,400 years.In principle, Takaful system is based on mutual cooperation, responsibility, assurance, protection and assistance between groups of participants.In other words, it is the provision of shared contributions to help those who are in need.These fundamentals are based on the sayings of Prophet Muhammad s.a.w. Some of the examples are:
Basis of Co-operation
Allah will always help his servant for as long as he helps others.(Narrated by Imam Ahmad and Imam Abu Daud)

Basis of Responsibility

The place of relationships and feelings of people with faith,between each other, is just like the body; when one of its parts is afflicted with pain, then the rest of the body will be affected. (Narrated by Imam al-Bukhari and Imam Muslim). One true Muslim (Mu'min) and another true Muslim (Mu'min) is just like a building whereby every part in it strengthens the other part. (Narrated by Imam al-Bukhari and Imam Muslim).

Basis of Mutual Protection

By my life, which is in Allah's power, nobody will enter Paradise if he does not protect his neighbour who is in distress. (Narrated by Imam Ahmad). Based on the above hadith, Islamic scholars had decided that there should be a concerted effort to implement the Takaful concept as the best way to resolve these needs.

Understanding the Takaful Contract

Although insurance as a concept is permissable under Shariah law, certain practices in conventional insurance breach Shariah law. The current Takaful Practise uses a combination of two types of contracts ('aqad). These are a contract of Donation (Tabarru") with a condition precedent and a contract of Agency (Wakala) which are free from the elements of usury (Riba), wager or gambling (Maisir) and uncertainty (Gharar). The Takaful system stresses the spirit of co-operation and joint responsibility among participants.