Takafol Vs Conventional Insurance?

Takafol Vs Conventional Insurance?

Question:

What is the difference between Takafol and conventional insurance and can we get Takafol in South Africa?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

v

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 

We apologize for the belated response.

 

Conventional insurance refers to the payment of a risk premium in exchange for the

transfer of risk from the policyholder to the insurance provider. Such a transaction is

impermissible as the exchange and subsequent payment of premium thereof is

impermissible. Moreover conventional insurance contains various impermissible elements

such as Qimar/gambling, Gharar/future uncertainty and Riba/interest.

 

Takafol is an Arabic word which refers to mutual indemnification and guarantee. In

others words, the joint shareholders and stakeholders jointly indemnify themselves in a

system of mutual indemnific ation and joint guarantee. This concept is similar to a

mutual co-operative scheme. Essentially the Takafol policyholders mutually indemnify

each other from potential future uncertain events by jointly contributing to a joint pool.

This joint pool invests into shariah compliant investments, reserves a liquidity pool for

indemnification and engages in Re-Takaful for further indemnification. Takafol does not

entail an exchange for risk transfer but rather a premium contribution (Tabarru) to a

joint pool for joint indemnification purposes. Takafol/Islamic indemnification finds

substantiation from various Shar’ee concepts including that of Aaqilah and joint

indemnification by one tribe to another tribe and the concept of Ta’awun and

Ta’ahud/mutuality and solidarity as expressed by Rasullullah Sallalallahu Alayhi Wa

Sallam in the Madinah charter. In others words, the concept of mutual indemnity and

solidarity based on mutual agreement (Taradhi) finds consonance in the Shariah.

 

Kindly refer to the section on Takafol in my book titled “Your brief to Islamic Finance”

from our website www.shariahbusiness.com

 

Kindly forward us the specific policy terms of the Takafol you refer to in South Africa.

 

The Darul Iftaa is currently developing a unique shariah compliant medical aid scheme

for the benefit of the muslim public.

 

And Allah Ta’āla Knows Best

(Mufti) Ismail Desai

Chairman of Shariah Board and Fatwa Committee,

Darul Iftaa, Durban, South Africa

www.shariahbusiness.com

www.muftiebrahimdesai.com

www.askimamdesai.com

 

DISCLAIMER: The views and opinions expressed in this answer belong only to the author

and do not in any way represent or reflect the views of any organizations to which he

may be affiliated with. The opinions and educational information proffered in this

communication are based on the jurisprudential understanding and available knowledge

of the author. Given that contemporary issues and interpretations of contemporary

issues are subjective in nature, another scholar may reach different juristic inferences

and conclusions to those as expressed by the author. Whilst every effort has been taken

to ensure total academic integrity and honesty, the author is open to corrective

measures based on sound academics and juristic inferences. The Shari’ah ruling given

herein is based specifically on the specific scenario in question.  The author bears no

responsibility towards any party that acts or does not act on this answer and is

exempted from any and all forms of loss or damage.  This answer may not be used as

evidence in any court of law without prior written consent from the author.  Any or all

links provided in our emails, answers and articles are restricted to the specific material

being cited. Such referencing should not be taken as an endorsement of other contents

of that website.

 

(Announcement: The Darul Iftaa under the auspices of the Mufti Ebrahim Desai

Foundation is managed by Mufti Ismail Desai Saheb, son of Hazrat Mufti Ebrahim Desai

Saheb RA. Mufti Ismail Desai will continue his academic career by conducting an

intensive one year specialist programme in Islamic Finance, Banking and economics

(MA) and Iftaa training programme for Ulema and Shariah graduates. Mufti Ismail Desai

Saheb will also be conducting various programmes for the public on Islamic Finance,

Ishaahi Majlis and general Islamic Q&A. Alhamdulillah the Darul Iftaa currently has over

50 students from over 32 countries globally. The Darul Iftaa will be conducting

programmes on Islamic Finance, Business and Economics in various cities/countries. The

programme is conducted free of charge and you can request an event by contacting us

directly at www.shariahbusiness.com. You can contact the Mufti Ebrahim Desai

Foundation for any details on Hazrat Mufti Ebrahim Desai RA

at www.muftiebrahimdesai.com. We will keep you updated on our programmes and

events via our email data base and other media channels)

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 

We apologize for the belated response.

 

Conventional insurance refers to the payment of a risk premium in exchange for the

transfer of risk from the policyholder to the insurance provider. Such a transaction is

impermissible as the exchange and subsequent payment of premium thereof is

impermissible. Moreover conventional insurance contains various impermissible elements

such as Qimar/gambling, Gharar/future uncertainty and Riba/interest.

 

Takafol is an Arabic word which refers to mutual indemnification and guarantee. In

others words, the joint shareholders and stakeholders jointly indemnify themselves in a

system of mutual indemnific ation and joint guarantee. This concept is similar to a

mutual co-operative scheme. Essentially the Takafol policyholders mutually indemnify

each other from potential future uncertain events by jointly contributing to a joint pool.

This joint pool invests into shariah compliant investments, reserves a liquidity pool for

indemnification and engages in Re-Takaful for further indemnification. Takafol does not

entail an exchange for risk transfer but rather a premium contribution (Tabarru) to a

joint pool for joint indemnification purposes. Takafol/Islamic indemnification finds

substantiation from various Shar’ee concepts including that of Aaqilah and joint

indemnification by one tribe to another tribe and the concept of Ta’awun and

Ta’ahud/mutuality and solidarity as expressed by Rasullullah Sallalallahu Alayhi Wa

Sallam in the Madinah charter. In others words, the concept of mutual indemnity and

solidarity based on mutual agreement (Taradhi) finds consonance in the Shariah.

 

Kindly refer to the section on Takafol in my book titled “Your brief to Islamic Finance”

from our website www.shariahbusiness.com

 

Kindly forward us the specific policy terms of the Takafol you refer to in South Africa.

 

The Darul Iftaa is currently developing a unique shariah compliant medical aid scheme

for the benefit of the muslim public.

 

And Allah Ta’āla Knows Best

(Mufti) Ismail Desai

Chairman of Shariah Board and Fatwa Committee,

Darul Iftaa, Durban, South Africa

www.shariahbusiness.com

www.muftiebrahimdesai.com

www.askimamdesai.com

 

DISCLAIMER: The views and opinions expressed in this answer belong only to the author

and do not in any way represent or reflect the views of any organizations to which he

may be affiliated with. The opinions and educational information proffered in this

communication are based on the jurisprudential understanding and available knowledge

of the author. Given that contemporary issues and interpretations of contemporary

issues are subjective in nature, another scholar may reach different juristic inferences

and conclusions to those as expressed by the author. Whilst every effort has been taken

to ensure total academic integrity and honesty, the author is open to corrective

measures based on sound academics and juristic inferences. The Shari’ah ruling given

herein is based specifically on the specific scenario in question.  The author bears no

responsibility towards any party that acts or does not act on this answer and is

exempted from any and all forms of loss or damage.  This answer may not be used as

evidence in any court of law without prior written consent from the author.  Any or all

links provided in our emails, answers and articles are restricted to the specific material

being cited. Such referencing should not be taken as an endorsement of other contents

of that website.

 

(Announcement: The Darul Iftaa under the auspices of the Mufti Ebrahim Desai

Foundation is managed by Mufti Ismail Desai Saheb, son of Hazrat Mufti Ebrahim Desai

Saheb RA. Mufti Ismail Desai will continue his academic career by conducting an

intensive one year specialist programme in Islamic Finance, Banking and economics

(MA) and Iftaa training programme for Ulema and Shariah graduates. Mufti Ismail Desai

Saheb will also be conducting various programmes for the public on Islamic Finance,

Ishaahi Majlis and general Islamic Q&A. Alhamdulillah the Darul Iftaa currently has over

50 students from over 32 countries globally. The Darul Iftaa will be conducting

programmes on Islamic Finance, Business and Economics in various cities/countries. The

programme is conducted free of charge and you can request an event by contacting us

directly at www.shariahbusiness.com. You can contact the Mufti Ebrahim Desai

Foundation for any details on Hazrat Mufti Ebrahim Desai RA

at www.muftiebrahimdesai.com. We will keep you updated on our programmes and

events via our email data base and other media channels)

 

and Allah Ta'ala Knows Best

Mufti Ismail Desai
Darul Iftaa
Durban, South Africa

Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.

Browse   next Fataawa

Legacy of Mufti Ebrahim Desai in Islamic Commerce and Finance

Listen to Audio podcast of a Radio Islam programme

TOP