1. Is Risk Protection (insurance) against Tawakkul (total dependence upon Allah (SWT))?

2. What is Takaful?

3. How is uncertainty (gharar) eliminated from Takaful contract?

4. All Insurance   is a form of Gambling or Wagering, which is forbidden in Islam.

5. Does a Takaful Operator seek to maximize profits and take benefits away from Policyholders?

6. Do I need insurance/Takaful?

7. Do Takaful contributions entail a higher rate than the conventional insurance   premium?

8. Can Takaful cover theft of my car?

9. How will I get a claim from a Takaful Operator?

10. How is it ensured   that   all activities   of Takaful companies   are Shariah compliant?

11. Is Takaful transacted   in other countries?

12. How many Takaful models are there?

13. What Takaful Model is followed   in Pakistan?

14. How is Takaful companies' investment income Riba-free?

15. Is Takaful just a change of label?

16. What is meant by Surplus   Sharing?

17. Is there a single Participant Takaful Fund or separate PTFs for each class of business?


1: Is Risk Protection (insurance) against Tawakkul (total dependence upon Allah(SWT))?

No. Human actions change the Will of Allah (SWT) for our destiny. Whether a person has insurance/Takaful or not has no effect on future   events.   However,   we   are   instructed   to   take precautions and then fully trust and depend upon Almighty Allah (SWT). In a Hadith narrated by Anas bin Malik, one day Prophet Muhammad (PBUH) noticed a Bedouin leaving his camel without tying it. He (PBUH) asked the Bedouin, “Why don't you tie down your camel"? The Bedouin answered, “I put my trust in Allah (SWT)". The Prophet (PBUH) then said, "Tie your camel first, then put your trust in Allah (SWT)". [As quoted in Sunanat-Tirmidhi, 1981.]

2: What is Takaful?

Comes   from the Arabic   root-word   'kafala'   which means to guarantee,   to help, to take care of each other’s needs.   Takaful   refers   to   mutual   protection   and   joint guarantee. Operationally, Takaful  refers   to   participants mutually contributing to the same fund with the purpose of having mutual indemnity in the case of peril or loss.

3: How is uncertainty (gharar) eliminated  from Takaful contract?

Uncertainty can never be eliminated; it remains in the Takaful Contract as well. But, since the Takaful contract comes under Tabarruaat, the uncertainty   (gharar)   is considered to be within tolerablelimits under Shariah. Insurance,   being a contract   of   exchange   (muawadat),   contains   "excessive gharar" and is termed as fasid.

4: All Insurance is a form of Gambling or Wagering, which is forbidden in Islam.

Risk or uncertainty can be divided into: Pure Risk and Speculative Risk. Pure Risk involves the possibility of loss or no loss. For example, damage to property due to fire. Pure Risks are the subject of insurance risk protection and Takaful. On the other hand, Speculative Risk involves the possibility of loss, no loss or gain. For example, venturing into a new business, orgambling on horse race. Speculative Risks that include a potential Gain or Profit cannot be insured. Takaful schemes use the principle of indemnification to compensate for the loss that occurs to a Takaful Participant. Takaful insures only Pure Risks and the claims are only payable in the event of Loss to cover repairs, damage, replacement of property, or an agreed fixed amount.

5: Does a Takaful Operator seek to maximize profits and take benefits away from Policyholders?

Takaful operators are mutual or cooperative   entities. The goal of Takaful is community well-being and self-sustaining operations,   not high profits. Under the Takaful Mudarabah Model, surplus   (or profits) is shared fairly and equitably between   the share holders   and the policyholders   (i.e. the 'Participants').   Under the Takaful Wakalah Model, surplus is returned entirely to the Participants.

6: Do I need insurance/Takaful?

A Takaful scheme gives usan opportunity to practice the virtues of Islam, including self-purification. Surah AI Maa'idah (V.2) says: "Help one another infurthering virtue and Taqwa (God-consciousness), and do not help one another in evil and transgression".   In a Hadith narrated byAhmad and Abu Daud: Whosoever fulfills the intentions (needs) of his brother, Allah willfulfill his intentions. And Allah always helps those who help their brothers in need. The first Constitution   in Medina (622 CE) arranged by Prophet Muhammed (PBUH) contained   three aspects directly related to risk protection: social insurance for the Jews, Ansar and Christians; Article 3 concerning   'wergild' or 'blood   money';   and provision   for Fidyah (ransom) and 'aaqila'. We should follow his (PBUH) example to meet our needs and social obligations.

7: DoTakaful contributions entail a higher rate than the conventional insurance   premium?

No. Takaful   companies     are   as   competitive     as   their conventional insurance counterparts. Opting for Takaful will not make you pay any higher costs, as such.

8: Can Takaful cover theft of my car?

Yes, Takaful companies offer the same variety of products offered by any insurance company, whether it is Fire, Marine, Motor, etc. In addition, most of the Takaful operators have the expertise   and experience to deliver   tailor-made   specific solutions for the benefit and convenience of their clients. The only exceptions are those risks that are not in conformity with the Shariah, e.g. breweries, casinos etc.

9: How will I get a claim from a Takaful Operator?

  1. procedures, including   claims, are the same as in conventional insurance companies. The difference lies in the nature of the contract, not in the procedures.

10: How is it ensured that all activities of Takaful companies are Shariah compliant?

All Takaful Operators are governed by the SECP's Takaful Rules, 2005 that require the Takaful operators to constitute a "Shariah Board” comprising of Shariah Scholars of repute. Moreover, all Takaful companies have to undergo a "Shariah audit" as well, in addition to the customary Accounting audit, in each accounting period.

11: Is Takaful transacted in other countries?

Takaful is a new phenomenon in Pakistan. The first Takaful company was established   in 1979 - The Islamic Insurance Company of Sudan. Now, there are more than 100 Takaful Companies in over 20 countries.

12: How many Takaful models are there?

In Islam, there is room for diversity within certain prescribed parameters. Overthe centuries, several Takaful Models have evolved which are approved by the Islamic scholars. While they all share the same fundamental goal of co-operative risk sharing, these models differ slightly in legal structure and organizational   operations. Takaful Models are usually described by the Islamic contracts used; namely, Hibbah, or 100% Tabarru' [Sudan], orAl Mudarabah [Bahrain/Malaysia], or AI Wakalah [Saudi Arabia], or Wakala/Waqf [Pakistan].

13: What Takaful Model is followed in Pakistan?

According to the SECP’s Takaful Rules, 2005, in Pakistan a Takaful product shall be based on the principle of Wakala or Mudaraba or both. Therefore, Takaful Operators in Pakistan follow a refined hybrid model named "Wakala - Waqf model. It is a Wakala model in which thefund is made a separate legal entity by virtue of it being a waqf. The relationship of the participants and the operator is directly with the Waqf fund. The operator is the 'Wakeel' of the fund and the participants pay contribution to the Waqf   fund by wayof Tabarru (contribution).

 14: How is Takaful companies' investment income Riba-free?

Unlike insurance companies, whose investment income may contain Riba, Takaful companies   invest funds in Property, Islamic Banks, Shariah compliant Stocks and other Shariah approved securities like Sukuk bonds etc.

15: Is Takaful just a change of label?

Although the end result is the same since both insurance and Takaful   aim to provide   compensation against possible losses, yet the crucial difference lies in the way that each does this. The notion “ends justify means" does not hold when it comes to Islam where both the ends as well as the means have to   be   in   order.   Chicken   can   either be slaughtered or given an electric shock;   both achieve the same end, a dead chicken. However, the former way makes the meat Halaal for eating where as the later renders   it Haraam.

16: What is meant by Surplus Sharing?

The Takaful Operatoracts only as the Wakeel of the Waqf Fund. If, at the end of the year, there is surplus in the Fund (I.e. after adding all its income and deducting all the outgo), such surplus Will be distributed amongst the participants proportionately after taking into account any claim benefits already availed.

17: Is there a single Participant Takaful Fund or separate PTFs for each class of business?

A General Takaful operator   may create a single   PTF or separate PTFs for different classes of business." (Section 8(5) of the SEECP's Takaful Rules, 2005). The surplus is thus calculated in accordance with the practice adopted.