In the UAE, we hear the term ‘Takaful’ just as often as ‘insurance’. Most of us would just assume that it is Islamic insurance. But do you know what the term really means?
What does the term ‘Takaful’ mean?
The idea of Takaful originated from the Arabic word ‘kafalah’ which means ‘to take care of’ or ‘be responsible for’. ‘Takaful’ refers to a shared responsibility or joint guarantee. This 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 Takaful insurance works is very different. Under a conventional insurance arrangement, the ‘insurer’ sells an insurance policy which offers protection against specified risks, and the ‘insured’ buys the policy at a given price.
Unlike conventional insurance plans, Takaful insurance works like a cooperative arrangement. A group of individuals contribute a certain amount of money which is pooled in collectively. This pool of money is used to compensate any member of the group in the event of a loss.
The joint Takaful fund is managed by a Takaful operator on behalf of the individual participants. The operator charges a fee for its fund management, marketing and underwriting services. After the claims are met, any surplus left in the Takaful fund belongs to the participants.
[Related: Why apply for Islamic personal finance?]
Who offers these plans in the UAE?
Based on the last released report by the Insurance Authority (2014), 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.
Regulations overseeing the Takaful market
The UAE’s insurance market regulator, the Insurance Authority (IA) introduced a comprehensive set of regulations in 2010 governing Takaful insurance. This was further supplemented by new financial regulations issued in 2014, to regulate and oversee all financial aspects involved in the operations and management of Takaful companies.
[Related: Don’t understand your car insurance policy?]
Are you interested in applying for a Takaful plan to insure your car? You can now compare various Takaful auto insurance policies online, on Souqalmal.com. You can get free quotes and buy your policy securely or choose to save your quote for later.