Takaful: A Sustainable Alternative to Conventional Insurance

What is Takaful?

Takaful, also commonly referred to as Islamic Insurance, is a sustainable alternative to conventional insurance. Though the primary aim of conventional insurance and takaful is to provide financial coverage to participants, Takaful is different from the former. Unlike conventional insurance, Takaful reflects the ideals of Shariah that are recognized in the Holy Qur’an and the Sunnah. It also does not contain Haram (impermissible) elements which are Al-gharar, Al-Maisir, and Riba.

Takaful, which means warranty or guarantee, originated from the Arabic word ‘Kafala’. There are various types of Takaful plans that participants can subscribe to by offering donations (Tabarru’) or commonly known as contributions. The donations are pooled in a Takaful fund which is managed by a Takaful operator. The donations that are collected in the Takaful fund are invested in Shariah-compliant activities and businesses. While most Takaful operators in Malaysia follow this model of Wakalah (agency), there are other takaful companies that follow the profit-sharing (Mudarabah)Model and the Waqf Model.


When the participants subscribe to a plan by providing their contribution (Tabarru’), they also promise to provide mutual assistance (Ta’awun) to each other. That means, if any participant of a Takaful plan faces a risk, danger or any agreed unforeseen circumstances, the entire group offers their mutual assistance to the needy participant by providing financial help. The financial coverage is provided from the funds that are donated by the members of the plan. This system of guaranteeing each other against any loss or damage is instrumental to the teachings of Islam. These features that propagate brotherhood and solidarity are also similar to the features under Aqilah (fulfillment of blood money) which was approved by the Prophet Muhammad. In fact, the spirit of helping each other is also promoted in other religions, other than Islam.

Takaful vs Conventional Insurance

A Sustainable Alternative

Takaful is a sustainable alternative for anyone who wants to subscribe to a Shariah-compliant system. Unlike conventional insurance, Takaful does not invest in Non-Shariah compliant funds nor does it have Haram elements. So, even the economic crisis may not have drastic effects on its functioning, enabling it to be a sustainable option in the long run. You can check out the various Takaful products that are available and subscribe to those that align with your needs.