Revisiting Takaful Insurance: A Survey on Functions and Dominant Models

Takaful is a growing and fast-developing industry, which offers an insurance policy that complies with Islamic law. Such business is highly recommended by most Muslim scholars because it reflects the real meaning of brotherhood in protecting individual and corporate bodies against loss or hazards to themselves and their properties. As a result, a number of operational models have been applied by takaful operators1 by adopting one or more contracts, such as Mudarabah, wakalah or waqf. This paper will therefore highlight important issues that deal with the background of Islamic insurance in terms of definition, functions, as well as exploring takaful contract constructions and various mechanisms linking the contract parties. Finally, this paper will highlight the most dominant and practiced models used by takaful operators worldwide

Keywords:

definitions, Functions, contract mechanisms models,

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Such as perils or hazard. If the participants are intending to invest some of the money as their savings and donate some portions for mutual indemnity, then the governing contract is mush- arakah, together with tabarru or donation of a portion of the contribution to the takaful fund (Ali and Odierno, 2008).
Such as “piety purification, brotherhood, charity (tabarru or contribution), mutual guarantee, community well-being as opposed to profit maximization. Islamic General Insurance. Islamic Life Insurance. Within the scope of Family takaful are offered different types of saving and protec- tion products, such as education, mortgage, retirement plans, protection for critical illness or disability, retirement annuities and waqf plans. A family plan may last as long as 10, 15, 20 years or more (Bhatty, 2008).
General takaful is more concerned with causality types of product in the form of in- dividual retail products such as household fire protection, motor, medical and health cover, personal accident protection during Hajj season, or corporate segment prod- ucts such as marine and aviation to cover transit cargo, engineering, or fire, the con- tract for which normally stands for one year. The operator cannot ask for an additional wakalah fee in the future if the calculated fee was underestimated. CCB Rulebook, 2005.
Participant’s donation varies in accordance to his age at the time of the contract (Hassan and Lewis, 2007).
This model is highly recommended by the AAOIFI to be used by the takaful op- erator (AAOIFI, 2003). It has a dominating presence on both Middle Eastern and global markets.
The word waqf and its plural form awqaf are derived from the Arabic root verb waqafa, which means causing a thing to stop and stand still. The second meaning is simply pious (charitable) foundations (Cizakca, 1998). In Shari’ah, waqf is a volun- tary, permanent, irrevocable dedication of a portion of one’s wealth in cash or any other kind to Allah (Ismail, 2006).
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