What Exactly is Insurance?

Insurance is the transfer of risk by an individual, such as yourself, or an organisation, such as your business, to the insurance company. You or your organisation will thus be known as the policy owner. The insurance company receives payment in the form of premium and will compensate you in the event of losses or damages sustained by you.


Takaful is a protection plan based on Shariah principles. By contributing a sum of money to a common takaful fund in the form of participative contribution (tabarru’), you undertake a contract (aqad) to become one of the participants by agreeing to mutually help each other, should any of the participants suffer a defined loss.

Both insurance and takaful have similar basic principles. For instance, the insured, such as yourself, must have a legitimate financial interest in the risk you are insuring, meaning you must suffer a financial loss when the insured event occurs.

You can also buy more than one policy or plan to protect a particular risk but in the event of loss or damage, you can only make one claim. The amount payable will then be contributed by the insurance companies involved. As such, you cannot profit from your general insurance policy or takaful plan. If you suffer a loss, you will be compensated accordingly and no more than that. You will be paid or ‘indemnified’ to the position you were in before the loss. However, if you wish to cover your life, you can buy more than one policy.

Your insurance or takaful contract is a contract of utmost good faith (trust). Thus, you as the policy owner need to disclose all material information required. If any of the relevant material facts are not disclosed, the policy may be invalid and you will not be protected against any loss or damage.

In addition, under the takaful plan, you can enjoy a share of the surplus from the takaful fund, based on a pre-agreed ratio if you have not made any claim during the year.

You can buy an insurance policy or participate in a takaful plan

• Directly from insurance companies or takaful operators
• Through registered agents or licensed brokers
• From banking institutions that have bancassurance arrangements with insurance companies or takaful operators; and
• Via the internet

Useful pointers when buying an insurance policy or participating in a takaful plan

• Understand the policy or plan including the product features, conditions, benefits limitations and exclusions
• Ensure that the premium or contribution payable is affordable
• Ensure that the amount of coverage taken is adequate and suits your needs
• Ensure that all material facts are fully disclosed
• Deal only with registered agents/licensed brokers or directly with an insurance company or takaful operators
• Monitor the period of coverage and time for payment of premium or contribution

 sumber : http://www.insuranceinfo.com.my/learn_the_basics/insurance_made_clear.php

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