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
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
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.
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