Complete Guide to Takaful Insurance in Malaysia, Insurance vs Takaful

Kali terakhir diperbaharui December 12, 2022 oleh Hariz Hafiz
Complete Guide to Takaful Insurance in Malaysia, Insurance vs Takaful

Takaful insurance and conventional insurance both play an important role in life. It aims to provide you with financial protection in the event of contingent things such as road accidents, critical illnesses, loss of property or death. However, there are differences between conventional takaful and conventional insurance, especially in terms of concepts, principles and methods of implementation in Malaysia. This article will help you identify the differences of insurance and takaful, the type of takaful insurance and the meaning of takaful in Islam and other matters related to Takaful insurance for your reference.

5 Things You Should Know About Insurance Takaful

Basically, takaful insurance products can be considered as Islamic-friendly Shariah -compliant insurance. Takaful insurance is also open to all and not limited to Muslim consumers only non-Muslims can also seek takaful protection and enjoy the advantage of takaful.

Takaful insurance protection plays an important role in ease the burden, especially in the event of a disaster. Here are five things you need to know about Takaful Insurance:

1. What Is Takaful Insurance?

Takaful insurance refers to a Shariah -compliant Insurance Plan based on joint cooperation, responsibility and protection. In other words, takaful products protect yourself including your assets or property in the event of any disaster. Interestingly, all risks and funds in takaful are shared between policyholders and insurance companies. It was introduced as an alternative to consumers especially Muslim users to choose the right insurance and avoid any elements of usury ‘(benefits), al-Maisir (gambling), and al-Gharar (uncertainty) principles.

2. Takaful’s Main Features

Here we share the main features of the takaful plan to help you make the best choices.

Risk Sharing

The first takaful feature you need to know is risk sharing. In line with the purpose of Takaful insurance, it offers risk sharing among members and all parties under the takaful, and risk liability is not limited to insurance companies such as conventional insurance.

Cashback No Claim Policy

If you do not make any current claims during the protection period, you will receive a cash rebate from the takaful company. The amount of rebates received is subject to the takaful company, no fixed amount is determined.

Shariah-compliant

The last feature of takaful protection is Shariah -compliant. For example, takaful insurance is not allowed to be involved in any banned elements such as usury ‘, Maisir and Gharar.

takaful vs insurance

3. Types of Protection in Takaful Insurance

Takaful products offered by insurance companies are generally divided into two categories: Family Takaful Products and General Takaful Products.

Family Takaful

This type of product is divided into several categories as follows:

1. Family Takaful

This policy offers long-term protection and savings for individuals and families;

2. Investment-related Takaful

For this product, it combines Shariah -compliant investment and takaful protection under the same policy;

3. Medical and Health Takaful

This takaful product offers protection for the cost of treatment and admission to private hospital ward;

4. Takaful Education Children

This takaful plan acts as a long -term savings to cover the cost of education in the future. In addition, the policy also provides financial protection for your child in the event of an accident, permanent defect or death.

Takaful Am

For the general takaful, this product is divided into several categories as follows:

1. Car Takaful

Third Party Takaful Car Insurance protects you from any loss or damage to a third party vehicle caused by accident, theft or fire. It also protects the policyholder in the event of any injury or death. Comprehensive Takaful Insurance Plan offers comprehensive protection that protects policyholder and third party from any risk of accidental injury, theft or fire.

2. Home Takaful

Home Takaful Insurance is of two types: House Owner and House Holder Takaful. Home takaful generally protects the home structure from any risk of damage and losses caused by floods, fires, or other disasters. Household takaful protects households such as furniture, household goods, electrical appliances and others from any damage and loss.

3. Self-accident takaful

Takaful Life Insurance provides protection to you and your family by providing compensation in the event of death, injury or disability caused by accident.

takaful insurance in malaysia

Reasons Conventional Insurance Is Not Accepted in Islam

Islam requires that each of its followers seek halal in every matter and has been the duty of Muslims to use Islamic-based protection products such as takaful. The National Council of Fatwa Committee for Islamic Religious Affairs Malaysia (MJFK) has ruled that all types of conventional insurance are not required for the following reasons:

  • The insurance itself contains an element of gharar (uncertainty). In the event of no disaster, the premium money paid is probably just burning. In other words, one party benefits, the other is at a loss;
  • The terms of the goods specified by the syariah are not met;
  • Insurance contains usury elements;
  • There is a difference in the value of money (the fact that the money and the money must be the same value).

Differences Between Takaful and Conventional Insurance

Although conventional takaful and insurance provide similar benefits, both have significant differences. Basically, takaful insurance represents Islamic principles while conventional insurance is a commercial product.

Takaful Conventional Insurance
Subject to the Islamic Financial Services Act (IFDA) 2013Subject to the Financial Services Act (FSA) 2013
Participants make a contribution based on the concept of tabarru ‘(donation)Policyholder paying premiums for protection value based on the concept of sale
Takaful operator is the fund managerInsurance company is the risk owner
Participation in a Takaful Plan based on a joint guarantee contract between insurance participantsInsurance is a contract of sale and purchase between the Insurance Company and the Policyholder
The Shariah Authority Office was established to ensure that Takaful Operator transactions are carried out in accordance with Shariah PrinciplesThere is no need to form a Shariah Authority Position
There is no element of maisir (gambling) and riba’ (interest). Nevertheless, the element of gharar (uncertainty) exists in takaful but to an acceptable level under the Tabarru’ (donation) contract.The existence of gharar (uncertainty), Maisir (gambling) and riba’ (interest)
Donated money is invested in a Shariah compliant platformPremium money is not required to be invested in Shariah compliant platforms
The benefits of takaful can be donated or distributed by farid to the heirsOnly the amount that has been paid can be inherited, the rest belongs to baitulmal

The Main Reasons You Must Have Takaful As a Protection

In general, Takaful Insurance is open to all and is not limited to Muslims only. However, many are mistaken and think that takaful products are only open to Muslims while they are open to all, and consumers can choose other alternatives offered besides conventional insurance. Here are some of the main reasons you need to have a takaful as a protection.

1. Unexpected Risks

Basically, takaful ownership is important as a protective device in the event of any unexpected risk such as accidents, injuries and so on. In other words, Takaful acts as an umbrella that protects you during the rain. You will receive proper protection or compensation depending on your policy in the event of a disaster.

2. Protect Property and Assets

In addition to protecting yourself, Takaful also plays a role in protecting your property from any disaster – Takaful acts as a protection and prevents you from spending a lot of money if you are having problems. For example, if your car is covered by flood insurance, you do not have to worry in the event of a flash flood that drowns your car.

3. Cooperation Together to Help Others

Basically, the concept of insurance takaful is based on mutual cooperation. This means that the takaful owner not only protects themselves when it comes to disaster, but also provides assistance in ease the burden on the other takaful participants. According to the takaful contract, the agreement is based on the concept of ta`awun namely cooperation and helping fellow members.

How to Get the Best Takaful Insurance?

In addition, Qoala also provides some tips and guidelines you can follow if you plan to buy Takaful insurance as follows:

1. Investigate Whether the Agent Is Registered Under the MTA

To your knowledge, all company agents offering Takaful insurance services need to be registered with MTA (Malaysian Takaful Association) before being able to advertise and sell takaful products. Therefore, it is advisable to do a review in advance to avoid fraudulent cases of individuals disguising as a takaful agent. You can check the status of the takaful agent registration through the MTA website.

2. Identify the Amount of Protection Required

It is advisable to identify the appropriate amount of protection for your needs. Typically, the amount of protection required varies depending on the individual’s needs. According to the Malaysian Life Insurance Association of Malaysia, LIAM), you are advised to seek at least 10 times your annual income. For example, if your annual income is RM40,000, then it is advisable to take a total protection of RM300,000 or more depending on your ability.

3. Select the Best Protection Policy

If you want takaful protection, you need to make sure all basic benefits are protected such as death, disability, critical illness and property. Basically, it’s hard to find a protection plan that covers all protection. Therefore, you need to select a takaful insurance cover policy that suits your needs. For example, you can choose the Life and Family Takaful Plan if you are looking for a policy that benefits after death. In addition, you can also add additional protection and consider other things such as savings, investments and more.

Hopefully this partnership can help you get the best takaful car insurance and the best takaful life insurance in Malaysia. You can also use the Qoala platform which provides the best variety of takaful protection plans from various popular insurance companies in Malaysia. Ask for a quote now!

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