In the UAE, we hear the term ‘Takaful’ very often used when we talk about insurance. Many of us assume assume it is the Islamic version of insurance but let’s spend some time to find out what it really means.
What does the term ‘Takaful’ mean?
The word Takaful originates from the Arabic word ‘kafalah’ which means ‘to take care of’ or ‘be responsible for’. It refers to a shared responsibility or joint guarantee and further translates into mutual protection against losses.
In essence it is a Shariah-compliant alternative to conventional insurance.
How does it work?
Though the benefits of Takaful plans are similar to conventional insurance, the way it works is very different. Under a conventional insurance arrangement, an insurance company sells a policy to a consumer for a certain price and in return, the company provides protection against specific unforeseen circumstances.
Unlike conventional insurance plans, Islamic insurance works like a cooperative arrangement. A group of individuals contribute a certain amount of money every year into a pool which is then used to help and support any member of the group in the time of need.
The joint Takaful fund is managed by an operator on behalf of the individual participants in return for a certain yearly fee. What is very interesting about the way it works, is that if that every year, after everyone in need has been paid out, whatever is left as surplus is distributed amongst the contributors of the fund.
Who offers these plans in the UAE?
Based on the last released report by the Insurance Authority, out of the 60 insurance companies operating in the UAE, 11 national companies offer Takaful insurance plans. These include Noor Takaful, SALAMA – Islamic Arab Insurance Company, Aman Takaful, Abu Dhabi National Takaful Company, Al Hilal Takaful, Methaq Takaful Insurance, Dar Al Takaful, National Takaful Company – Watania, and Takaful Emarat.
Takaful plans are now available to meet a wide range of insurance requirements, both life and non-life. Under general Takaful insurance plans you can find auto, health, and travel, as well as other covers relevant for businesses.
If you are interested in looking up islamic plans for your car, you can look up which ones you are eligible for through the Souqalmal platform and get connected directly to insurance companies in the UAE.