A family takaful plan is a long-term savings and investment programme with a fixed maturity period.
Apart from enjoying investment profit, the plan provides mutual financial assistance among its participants.
The family takaful plan is a financial programme that pools efforts to help the needy in times of need due to untimely death and other mishaps resulting in personal injury or disablement.
The takaful plans designed by the takaful company would enable participants to participate in a takaful scheme with the following aims:
(a) To save regularly;
(b) To invest with a view of earning profits which are Sharia-compliant; and
(c) To avail of cover in the form of payment of takaful benefits to heir(s) should a participant die before the maturity date of his takaful plan.
The operations of family takaful·
A person who participates in any family takaful plan is called a participant. A participant may choose any one of the plans offered by the company. The family takaful plans have a defined period of participation.
The takaful company and the participant will enter into a long-term takaful contract, which is based on the principle of Al-mudharabah (profit-sharing).
The takaful contract spells out clearly the rights and obligations of the parties to the contract. The participant is required to pay regularly the takaful installments in consideration for his participation in the takaful plan.
The participant will decide the amount of takaful installments that he wishes to pay, but such an amount shall be subject to the minimum sum as determined by the company.
Each takaful installment paid by the participant shall be divided and credited by the takaful company into two separate accounts, namely the participant’s account and the participant’s special account. A substantial proportion, for example, such as 93% of this installment is credited into his participant’s account solely for the purpose of his savings and investment.
The balance is credited into his participant’s special account as tabarru’ for the purpose of mutual help.
Mutual financial assistance such as takaful death benefits to fellow participants is paid from the participant’s special account. What proportion of the takaful installment to be relinquished as tabarru’ and credited into the participant’s special account is determined based on sound actuarial principles.
The takaful installment credited into these two accounts will be pooled as a single fund for the purpose of investment activities undertaken by the takaful company in a manner permitted by the Sharia.
Any profits generated from the investment shall be shared between the participant and the company in a ratio to be mutually agreed between the participant and the company in accordance with the contract of Al-Mudharabah. For instance, if the ratio agreed is 7:3 then the participant shall be entitled to 70% of the profits whilst the company shall be entitled to 30%.
The participant’s share of the profits shall be credited into his participant’s account. With the accumulation of such profits, the balance in the participant’s account will increase over a period.
Family takaful benefits
In the event that a participant should die before the maturity of his family takaful plan, the following takaful benefits shall be paid to him:
(i) The total amount of the takaful installments paid by the participant from the date of inception of his takaful plan to the due date of the installment payment prior to his death and his share of profits from the investment of the installments which have been credited into his participant’s account;
(ii) The outstanding takaful installments which would have been paid by the deceased participant should he survive. This outstanding amount is calculated from the date of his death to the date of maturity of his takaful plan which shall be paid from the participant’s special account as agreed upon by all the participants in accordance with the takaful contract.
If a participant survives until the date of maturity of his takaful plan, the following takaful benefits shall be paid to him:
(i) The total amount of takaful installments paid by the participant during the period of his participation plus his share of profits from the investment of the takaful installments credited into his participant’s accounts.
(ii) The net surplus allocated to his participant’s special account as shown in the last valuation of the participant’s special accounts.
In the event that a participant is compelled to surrender or withdraw from the takaful plan before the maturity of his takaful plan, he shall be entitled to the surrender benefits.
The participant is entitled to receive the proportion of his takaful installments that have been credited into the participant’s account including his share of investment profits. However, the amount that has been relinquished as tabarru’ will not be refunded to him.
The various types of family takaful plans available in the market are:
(a) Family takaful plan for education
(b) Family takaful mortgage plan
(c) Group family takaful plan
(d) Group hospitalization and medical benefit
The operations of general takaful
General takaful schemes are basically contracts of joint-guarantee, on a short-term basis (normally one year), between groups of participants to provide mutual compensation in the event of a defined loss.
The schemes are designed to meet the needs for protection of individuals and corporate bodies in relation to material loss or damage resulting from a catastrophe or disaster inflicted upon properties, assets or belongings of participants.
In the event of a catastrophe or disaster resulting in a loss or damage to a property or bodily injuries or other physical disability to a person, the owner of the property or the person concerned may suffer substantial financial losses.
For instance, if a house is destroyed or damaged by fire, the owner would certainly require a sufficient sum of money to repair the house, or rebuild a new one as well as enough money to replace the damaged furniture, fixtures and fitting.
Similarly, a person being injured in an accident would require an adequate sum of money to pay for the medical treatment.
With the various general takaful schemes offered in the market, that person would be assured of takaful benefits in case of misfortune resulting from such loss or damage.
Participants of a general takaful scheme shall also enter into a contract with the company on the basis of the contract of Mudharabah. The contract stipulates the right and obligations of the participants as well as the company.
In consideration for participating in the various schemes, the participants agree to pay the takaful contributions as tabarru’. The company manages the general takaful business including managing the investment of the general takaful fund assets.
As the al-Mudharib, the takaful company will invest the general takaful fund in line with Sharia principles and all returns on the investment will be pooled back to the fund.
In line with the virtues of cooperation, shared responsibilities and mutual help as embodied in the concepts of takaful, the participants agree that the company shall pay from the general takaful fund, compensation or indemnity to fellow participants who have suffered a defined loss upon the occurrence of a catastrophe or disaster.
The fund shall also pay for other operational costs of general takaful business such as for the retakaful arrangements and the setting up of technical reserves.
Should there be a surplus (profits) in the general takaful fund after deducting all the operational costs of general takaful, that surplus will be shared between the participants and the company – provided the participants have not incurred any claims, and that no takaful benefits have been paid to them.
This sharing of the surplus will be in a ratio agreed in accordance with the contract of Al-Mudharabah. If the ratio agreed is 6:4, then 60% of the surplus will be shared among such participants whilst the balance 40% is the share of the company.
(Source: The Star, Malaysia, Contributed by Bank Negara Malaysia.)