Frequently Asked Takaful Questions
What is Takaful?
Derived from the root word “Takafala” which means to mutually guarantee one another, thus creating an alliance where participants contribute to a common fund which will be used to help any participant suffering from misfortune (examples death, disability or accident)..
What is the differences between Islamic Insurance (Takaful) and Conventional Insurance?
|Subject to Islamic Financial Services Act
|Subject to Financial Services Act (FSA) 2013
|Participant makes contribution base on Tabarru’ (Donation) concept
||Policyholder pays premium for the protection
|Takaful operator is the Fund Manager
||Insurance Company is the risk Owner
|Participation in a Takaful plan is based on contract of mutual help between participants and the Takaful Operator
||Insurance is a buy and sell contract between the Insurance Company and Policyholder
|Existence of Shariah Committee to ensure
that the Takaful Operator’s transaction is
done in accordance with the Shariah Principle
|No need for formation of Shariah Committee
|No elements of maisir (gambling) and riba’ (interest)
Note: gharar (uncertainty) exists in Takaful but tolerable
under Tabarru’ (Donation) contract
|Existence of gharar(uncertainty), maisir
(gambling) and riba ‘(interest)
What is the difference between Absolute Assignment and Hibah?
Hibah as practiced in Takaful is a Conditional Hibah that is revocable and shall only take effect after the death of the Participant or the Person Covered and also the Participant is no longer alive and it is only complete upon Takaful Hibah recipient acknowledge receiving the Hibah. Takaful Hibah is to be completed by the Participant who has attained the age of 18 years, where upon the nominee shall receive the death benefit including accumulated amount in the Participant Investment Account of the Takaful certificate as a beneficiary and not as an executor of will (wasi).
Meanwhile, for Absolute Assignment it is the transfer of ownership to a separate entity (assignee). The assignor cannot revoke that agreement after the transfer is made. The Absolute Assignment is complete should the assignee has attained the age of 18 years.
Is Absolute Assignment applicable in the Takaful operation?
Yes, Absolute Assignment is adopted in the Takaful operation.
How to overcome and resolve the misunderstanding on information amongst the agents regarding Conditional Assignment and Hibah?
Hibah is one part of the Islamic Law, which is giving one’s wealth to others without the expectation of any replacement or exchange. It is applicable either to family members (legal heirs) or members who are not entitled to inheritance. Hibah is applicable to adult and juvenile. Hibah is also applicable for both Muslim and Non-Muslim.
Absolute Assignment is one part of a Takaful benefit arrangement. Is it permissible to grant it to third party?
Yes, it is permissible and the participant can grant their right to third party be it individual or institution.
Is it permissible to change or transfer the Absolute Assignment name to others?
Yes, it is permissible to change or transfer Absolute Assignment to others.
There is opinion that the Absolute Assignment originated from the conventional insurance. Is it true and is it applicable in takaful?
Yes, Absolute Assignment was introduced by conventional insurance practice but later Takaful companies follow the same after approved by Shariah Committee.
Can Hibah be inherited as Faraid in Takaful?
Yes, Hibah given and fully accepted by beneficiaries can be inherited as Faraid.
There are those who said that Hibah is an alternative or a trick to avoid Faraid.
It is not true because Hibah is recognised in Islam and has the meaning of giving something out to others during his life as gift. Therefore thare is no trick to avoid Faraid.
What is the difference between beneficiary and nominee?
A Nominee is a person who is nominated in the Takaful certificate to receive or administer the certificate benefits (death benefit only) upon the demise of the certificate holder.
While beneficiary is a person who is entitled to receive and enjoy benefit from the certificate.
What is the difference between Contribution and Tabarru’?
Contribution is the gross amount paid by the participant without any deduction of charges in participating in any Takaful scheme. Whereas tabarru’ is the net portion of participant’s contribution channelled into Participant Risk Investment Account (PRIA) for the purpose of mutual help and pay for claims by eligible claimants.
What is iltizam bi al-tabarru concept?
Iltizam bi Al-Tabarru’ concept shall mean a commitment to donate, i.e. the concept whereby any Tabarru’ or contribution donated by the Participant into the Participants’ Risk Fund shall constitute a commitment made by the Participant. The actual Tabarru’/donation is deemed to have only occurred after payment of all claims and claims-related costs.
Does participant required to pay zakat on their contribution amount in the risk fund?
Participant is not required to pay zakat because the fund from participant is considered as contribution. The fund does not belong to him anymore.
As for the Investment Linked takaful product where the participant is required to pay zakat when it is due.
Does Hong Leong MSIG Takaful Berhad pay zakat on behalf of the participants?
Hong Leong MSIG Takaful Berhad only pays zakat on behalf of the shareholders and not for the participants. It is up to the participants to pay at their own when it is due.
What is the type of zakat paid by Hong Leong MSIG Takaful Berhad?
Hong Leong MSIG Takaful Berhad pay’s zakat on business.
What are the types of Islamic principles used in Hong Leong MSIG Takaful Berhad in its products?
Hong Leong MSIG Takaful Berhad applies the following Shariah concepts/principles:
- Iltizam bi al-tabarru' (Provision for donation before pure tabarru’)
Where else pure tabarru' is a donation for the purpose of mutual protection amongst the participants.
- Wakalah (Agency)
The wakalah concept is essentially an agency contract – principal relationship, where the Takaful operator acts as an agent on behalf of the participants and earns a fee for services rendered.
- Ju’alah (Performance fee)
When the takaful operator recorded a surplus in their risk funds, it shown that they are managing the funds effectively and therefore they are entitled to receive the surplus from participants a performance fee.
- Qardh Hassan (benevolent loan)
In the event of deficit in the risk fund, the company (HLMT) is required to support the risk fund by giving the benevolent loan.
- Repayment of Qardh Hassan
In the event of surplus recorded in the risk fund, takaful operator is required to make good to the shareholder fund by paying back amount of benevolent loan paid to the risk fund.
Does all the products of the Company approved by the Shariah Committee?
Yes, all the products of the Company are approved by the Shariah Committee of the company.
What are the Shariah Committee’s roles and responsibilities?
All Shariah Committee members are expected to participate and engage themselves actively in deliberating Shariah issues put before them. The main duties and responsibilities of the Shariah Committee are as follow:-
- Responsible and accountable for all Shariah decision, opinion, and views provided by them.
- Advise the Board and Hong Leong MSIG Takaful Berhad on Shariah matters after delegating the function the internal Shariah advisor
- Endorse all policies and procedures
- Endorse and validate relevant documentation
- Assess work carried out by internal Shariah Review and Shariah Audit
- Assist related parties on Shariah matters
- Advise on matter to be referred to the Shariah Advisory Council of the Bank Negara Malaysia
- Provide written Shariah opinion
Is there any Shariah Audit implemented in the Company?
Yes, there is Shariah Audit implemented in the Company.
What is Shariah Audit and who carries out the duty?
Shariah Audit is a regular Shariah Audit where it does the necessary checking for every business and material from Shariah point of view and not checking the Shariah unit. It will be carried out on an annual basis by the Qualified Internal Shariah Audit (ISA) personnel as to ensure that all company’s key functions and business operations comply with Shariah.
Is it permissible to change the ownership of the Takaful certificate?
Yes, it is permissible to change Takaful certificate to other person.
Must the beneficiaries of the Takaful benefit pay the Zakat on his/her receivable benefit? If so, what type of Zakat should be paid?
The beneficiary is not required to pay Zakat unless the Takaful benefits received are in his/her possession for more than one year (haul) without losing the threshold limit (nisab). Taking into account all necessary exemption i.e. to pay cost of living where the remaining balance left is eligible for Zakat payment.
Some Takaful Operators use nomination contract for death benefit. Is it applicable for hospitalization as well?
Hospitalization is considered as a direct gift /contribution from participants to the unfortunate participant. It does not need nomination where it will be used by the participant him/herself.
What is the consequence of breaching the Shariah Principles in Takaful business and products?
According on the Islamic Financial Service Act 2013 (IFSA 2013 or Act 795), any person/company who breaches the Shariah Principles will be held liable for that breaches and subject to imprisonment for a term not exceeding 8 years or to a fine not exceeding RM25 million or both.
Who are responsible to supervise of Shariah internally in the Company?
Internally, Shariah Department is an independent party who will supervise the company business and activities reporting directly to Shariah Committee (SC). While SC is the ultimate internal legislative entity to undertake the responsibility for supervision on the overall Shariah and Governance matters. They are also responsible to ensure that the overall Islamic financial, business, people and system are operated in accordance with Shariah principles or Shariah based company.
What are the main sources of Shariah Law that are used by Hong Leong MSIG Takaful Berhad?
The sources of Shariah Law that used by Hong Leong MSIG Takaful Berhad are divided into primary sources and secondary sources.
- Sunnah also known as hadith which are authentic reports
Secondary Sources of Shariah are Ijtihad which means opinions given by Shariah Scholars such as follows:
- The Ijma’ is an outright consensus agreement among renown Islamic jurist
- The Qiyas is referred to justify the reason, inference and dedication by applicable analogy based upon comparison of the cause (cillah) of new occasion ( furu’) with the originator case (usul)
- The masalih mursalah refers to matter where no definitive ruling or precedent in Shariah but still allowable because of their general benefit to the public
- The ‘uruf refers to customs or convention in accordance with the Shariah requirements.
- The Istihsan which refers to applications of discretion of the benefit of Muslim ummah.
- Qawl Sahabi which are views of the Prophet’s (pbuh) companions.
- The Istishab which refers presumption of continuity of existing.
- Sadd al Zaraei’ which refers to blocking of an unlawful means.
What is the different point of Wakalah model from Mudharabah model?
There are different types of Takaful business model in the industry such as Wakalah model, Mudharabah model, Wadiah model and Hybrid Wakalah model. Wakalah model allows the Takaful operators to have the agents where they are compensated with commissions. In the meantime, mudharabah model does not allow the Takaful Operator to have agents to promote the products and at the in same time cannot enjoy the commissions. Now a day, most of TOs are using Hybrid wakalah model.
What is iltizam bi al tabarru’ and how it is different from regular Takaful contribution?
Iltizam bi al tabarru’ is a concept of pre-determined tabarru’ or donation where it only happen when come to claim occurred from the misfortune members participant. In the event of surplus from the risk fund, the remaining balance will still be the participant’s right unless they voluntarily relinquish their right from that portion of donation to be remaining in the risk fund as donation or waqaf. It is different from the original tabarru’ where every contribution will be count as a pure contribution at the beginning with or without a claim.
Can participants take takaful to cover their conventional loan?
The SAC, in its 54th meeting dated 27 October 2005, has resolved that a takaful company may offer a takaful coverage for a customer’s asset even though the asset is financed conventionally, provided that it is offered separately and not as a package. SC of HLMT adopted the same.
What is a Surplus and to whom it belongs to?
Surplus is a term used to indicate the surplus from participants’ risk fund (based on iltizam bi al-tabarru` concept) where it derived after taking into account the provision of certain amount for payment of claims, retakaful, reserves and investment profits. Originally it belongs to the participants but the Takaful operator is still allowed to receive the surplus from the participants based on ju’alah (performance fee) principle.