What you should know…
Misconception No. 1
Risk Protection (insurance) is against Tawakkul – total dependence upon Allah (swt).
No human actions change the Will of Allah (swt) for our destiny. Whether a person has insurance/Takafol or not has no effect on future events. If it is raining, one wears a rain coat to protect his or herself from the rain and becoming wet. Anything wrong with this? No, of course not! So we cannot then say the person has gone against Qadr because they wore the raincoat. As long as the method and means of protection is allowed. We are instructed to take precautions and then fully trust and depend upon Almighty Allah (swt): in Hadith narrated by Anas bin Malik when an Arab Bedouin asked Prophet Muhmmad (PBUH), “Shall I leave my camel untied and seek Allah’s protection on it, or should I tie it?” The Holy Prophet replied, “Tie your camel and then depend upon Allah (swt).” {as quoted by Sunan Al Tarmizi, 1981,}.

Misconception No. 2:
All Risk Protection (insurance) is Haram-prohibited
Fiqh Council of World Muslim League (1398/1978) resolution and Fiqh Council of Organization of Islamic Conference (1405/1985) in Jeddah resolved that, “..conventional insurance as presently practiced is Haram.” And that, “..cooperative insurance (Takafol) is permissible and fully consistent with Shariah principles.” Hence, conventional insurance is prohibited for Muslims because it contains elements of Riba, Al Maisir, and Al Gharar. By contrast, Takafol provides risk protection in accordance with Sharia using principles of Ta’awun (mutual assistance), brotherhood, piety and ethical operations.

Misconception No. 3:
All Insurance is a form of Gambling of Wagering, which is forbidden in Islam
Risk or uncertainty can be divided into: Pure Risk and Speculative Risk. Pure Risk involves the possibility of Loss or No Loss. For example, damage to property due to fire. Pure Risks are the subject of insurance risk protection and Takafol. On the other hand, Speculative Risks involves the possibility of Loss, No Loss or Gain. For example, venturing into a new business, or gambling on horse race. Speculative Risks that include a potential gain or profit cannot be insured.

Takafol schemes use the principle of indemnification to compensate for the loss that occurs to a Takafol Participant. Takafol insures only Pure Risks and claims pay in the event of Loss to cover repairs, damage, replacement of property, or an agreed fixed sum. In Takafol Taawuni (assurance), the compensation equals each participant’s accumulated savings plus investment profit added to a sum covered taken from the Takafol general pool.

Misconception No. 4:
All Insurance seeks to maximize profits which takes benefits away from policyholders
Most conventional insurance companies are stock companies that seek to maximize profits. Since the interests of shareholders conflicts with policyholders, by raising prices, denying claims, etc. these insurers can boost profits for shareholders. Takafol operators, by contrast, are mutual or cooperative entities. The goal of Takafol is community well-being and self-sustaining operations – not high profits. Under the Takafol Model, surplus (or “profits”) is shared according to predefined ratio’s between shareholders and policyholders. Under the Takafol Wakalah Model, surplus is owned by the policyholders and may be reduced by a performance fee incentive for the operator before distribution to the policyholders.

Misconception No. 5:
How can my becoming a Takafol member benefit the local Ummah?
Alhumdilallah , a Muslim managed Takafol operation will naturally comply with the rules of Sahriah. This includes empowering fellow Muslims, doing Dawah as a company and spreading knowledge of Islamic finance. They will also have to distribute Zakat from their profits, thus now circulating money from the Muslim population to others who are needy. Whereas with conventional insurers most of our contributions are used for their benefit or to promote their way of life. So there are simple, tangible benefits to the local Ummah by moving away from conventional insurance to Ammanah’s Takafol products.

Misconception No. 6:
Insurance companies try not to pay for claims, is Takafol the same?
We cannot comment on other insurers and their methods of paying for claims. With Takafol, the Waqeel does not benefit by not paying your claim, it’s not like he will have more money by paying for less claims as the Waqf fund is not the property of the Takafol operator (Waqeel). The fund belongs to all the participants of the Takafol Waqf fund. All contributions are pooled into the Waqf, and claims are paid from here. So there is no question about paying claims. The main reason for claims not being paid is that either the vent is not covered, the asset being claimed for is not covered or the conditions of the Takafol contract are not complied with. A simple example is that a person has cover for their vehicle and it is a condition that they have a tracking device fitted. The vehicle is stolen and then we find that the person never installed a tracking device, after we clearly asked him to do so. In this case there is no cover as the client did not minimize the risk of theft by installing a tracking device as required.

Misconception No. 7:
“I don’t need Insurance/Takafol.”
A Takafol scheme gives us an opportunity to practice the virtues of Islam, including self-purification. Surah Al Maidah (V.2) says: “Help one another in furthering virtue and Taqwa (God-consciousness), and do not help one another in evil and transgression.” In Hadith by Ahmad and Abu Daud: “Whosoever fulfils the intention of his brother, Allah will fulfil his intentions.” And “Always help those who helps his brother.”

The first Constitution in Medinah (622 CE) arranged by Prophet Muhammad (PBUH) contained three aspects directly related to risk protection: social insurance for the Jews, Ansar and Christians; Article 3 concerning ‘wergild’ or ‘blood money’ and provision for Fidyah (ransom) and Aqila. We should follow his example to meet our needs and social obligations.

A Takafol scheme provides us the self-discipline for savings and the habits of sound financial planning to take care of ourselves and the needs of our children and families. Hadith by Sahih Al-Bukhari, as narrated by Amir bin Saad bin Abi Waqqas, describes Prophet Muhammad (PBUH) as saying: “verily, it is better for you to leave your offspring (heirs) wealthy than to leave them poor asking others for help” and “..The one who looks after and works for a widow and for a poor person is like a warrior fighting for Allah’s cause..” Also, from Sahih Muslim Hadith No. 59, as narrated by Abu Huraira, has the Holy Prophet (PBUH) saying: “Whosoever removes a wordly hardship from a believer, Allah (swt) will remove from him one of the hardships of the day of Judgment.”

Takafol operations can provide an effective method to accumulate the savings of individuals for the collective good of the community. In many Muslim communities lacking capital resources, a Takafol fund can become an engine for economic growth and development by channeling its funds into Sharia approved investments sponsored by the local business community.

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