Life Insurance from an Islamic Perspective

Takaful is the legal insurance in Islam.The word takaful come from the Arabic verb (kafalah) which means “guaranteeing each other” or “joint guarantee”.Takaful is an important rule and basic in Islam for Muslims who want to make banking transactions by a way allowed by islamic law.The principle of takaful is built on sharing between a group of participants in responsibility and assurance. It’s known that banking interests (fawayeed) is a kind of (riba) which is forbidden because the participants avoid the risk of loss and the profit is fixed.

Al-Takaful is the pact among a group of people, called participants, reciprocally guaranteeing each other; while Al-Mudharabah is the commercial profit-sharing contract between the provider or providers of funds for a business venture and the entrepreneur who actually conducts the business. The operation of takaful may thus be envisaged as the profit-sharing business venture between the takaful operator and the individual members of a group of participants who desire to reciprocally guarantee each other against a certain loss or damage that may be inflicted upon any one of them.

Takaful is a way to control the Muslim himself and to share in the society with his money also, so that means that it’s helping the Muslim himself to care abut his behavior, character, conscience and to organize the whole body of the family. It’s a good way to make the social relations stronger and to make a trust between people.

The first reason of takaful is providing a financial source after an accident for someone or after the death of the person who is responsible of a family. The second reason of takaful is providing a safe legal way to save money needed for a future investments.

The principles of Takaful are as follows:

-Policyholders co-operate among themselves for their common good.
-Every policyholder pays his subscription to help those that need assistance.
-Losses are divided and liabilities spread according to the community pooling system.
-Uncertainty is eliminated in respect of subscription and compensation.
-It does not derive advantage at the cost of others.

Takaful is separated to several types:
1-Takaful of a family which is a kind of insurance which want to release the coverage of any financial fees for a family after the death of one of its members and that’s by sharing with other participants for a limited period which is known well in the contract between its participants.

2-Takaful educational contract which cares about the tuition fees and all the fees needed for the education of any student in the family in case of the death of the donor or the father who is taking the responsibilities of these students.The other participants has to pay all the fees needed for the person who need that education as it’s written down the contract .

3-Takaful mortgage contract which cares about paying the money needed for any kinda of apartments,car,villa or lands mortgaged for someone in that group of the participants in case of his death or if he lost the ability to provide that money in case of illness.