What is Takaful in UAE

What is Takaful Islamic Insurance?

The term Takaful comes from the Arabic word kafalah, which indicates ‘safeguarding each other’. It’s a cooperative system where members contribute to a shared fund that provides financial protection when someone faces a loss.

A Takaful plan is a structured contract that explains how contributions, claims, and benefits are managed. Participants make regular contributions (similar to premiums), which are treated as donations (tabarru) to support fellow members.

If a claim arises, the payout is made from the pooled fund. At the end of the coverage period, any surplus is either —

• Distributed among participants or
• Carried forward to reduce future contributions

How Does an Islamic Life Insurance in UAE Work?

The functioning of Takaful is unique but simple. It involves three key players —

1. Participants: Members who contribute to the Takaful fund.
2. Takaful Fund: A shared pool that pays claims and covers risks.
3. Takaful Operator: The company that manages the fund for a fee.

Step-by-step process:

1. Collect Contributions 

Each policyholder contributes a fixed amount into a Takaful fund. These contributions are treated as donations (tabarru) to support other participants. 

2. Pay Claims 

When a participant faces a covered event (e.g., fire damage, critical illness, death, or disability), money is taken from the Takaful fund to cover the claim.

3. Distribute Surplus 

If there is a surplus in the fund after claims and expenses, it is not kept as company profit. Instead, it may be returned to participants as cash or used to reduce future contributions.

Key Principles of Takaful Insurance

Takaful is built on five guiding principles —

• Shariah Compliance: All operations avoid interest (riba), uncertainty (gharar), gambling (maysir), and investments in prohibited industries
• Mutual Cooperation: Participants pool resources to support each other in times of need
• Tabarru (Donation): Contributions are treated as donations rather than payments for profit
• Transparency & Fairness: Contributions, claims, and surplus distribution are clearly managed under Shariah board oversight
• Ethical Investment: Funds are only invested in halal, low-risk, Shariah-approved opportunities

Takaful vs Conventional Insurance

Here’s a quick comparison to understand the difference —

What is the Role of Takaful Insurance in Islamic Home Financing?

When applying for an Islamic mortgage (like Murabaha or Ijara), banks typically require Mortgage Takaful as part of the agreement.

It plays three crucial roles —

• Bank Requirement for Loan Approval: Islamic banks typically won’t finalise your home loan without a valid Mortgage Takaful policy
• Property Protection: Property Takaful covers your home against risks such as fire, theft, or natural disasters
• Loan Repayments: If you pass away or become disabled, the Takaful fund takes care of your mortgage payments that are still due 

By combining home financing with Takaful, you not only fulfill bank requirements but also protect your property and loved ones in a Shariah-compliant way.

How to Choose the Right Takaful Insurance Provider?

With several Takaful providers available, selecting the right one is important. Here are key factors to consider —

• Shariah Compliance & Certification: Make sure the provider is approved by a recognised Shariah advisory board and follows strict Islamic principles.
• Claim Process & Customer Support: Research reviews and ask about claim settlement times. A good provider should have a transparent and hassle-free claims process.
• Surplus Distribution Policy: Some providers share surplus funds with participants, reducing future costs. Check if and how this is offered.
• Coverage Options & Affordability: Compare contribution amounts, benefits, and coverage types (life, mortgage, medical, property, and more) to find a plan that suits your needs and budget.

How Does Policybazaar.ae Help You Get Takaful Insurance?

With Policybazaar.ae, you get the right coverage while avoiding unnecessary complications.

• Find the Best Takaful Provider: We help you compare multiple providers in one go. This can help you find the most suitable coverage.
• Handle Paperwork & Approvals: You can easily submit your documents online without worrying about delays.
• Provide Ongoing Support: From claim assistance to policy adjustments, we continue to support you even after your plan is in place. 

FAQs on Takaful Insurance