In this blog, we have discussed Takaful operations and the kinds of funds required for it. Give it a read.
All policyholders consent to promise one another and, rather than paying premiums, they make contributions to a common pool or a mutual fund to alleviate the financial liabilities of the accused. The pool of sum of collections makes the Takaful reserve.
The measure of the contribution that every member makes depends on the sort of coverage they require, and on their personal resources and condition. Just like conventional insurance, the policy i.e. Takaful Contract, determines the nature of the uncertain situation and time for coverage.
The Takaful fund is overseen and controlled for the benefit of the members by a Takaful Operator who charges a certain fee to take care of expenses. These expenses incorporate the expenses of deals and marketing and sales, indemnity, and the management of claims.
Any cases made by members of the policy are paid out of the Takaful pool and any remaining surpluses, in the wake of causing arrangements for likely expense of future cases and different funds, belong to the policyholders, and not the Takaful Operator. The remaining Takaful fund is then distributed among the participants or policyholders in the form of cash dividends or any other suitable form.
An Islamic insurance organization follows the following operational standards:
The constituents of the policyholder’s funds are:
All of the claims payable to the policyholders, reinsurance costs, technical funds, managerial costs, and so on., barring the costs of the investment branch, will be met out of the policyholder’s reserve.
The remaining balance to the credit of the policyholder’s reserve by the year’s end speaks to their excess. The General Assembly may designate the entire or some portion of the excess to the policyholders’ specific reserves. This will be equally distributed among the policyholders.
At the point when the policyholder’s funds are inadequate to meet their expenses, the shortfall is supported by the shareholder’s funds.
The shareholders volunteer themselves to release all the contractual liabilities of the policyholder’s reserves, however this risk doesn’t surpass their equity in the organization.
The constituents of the shareholder’s funds are:
All the managerial costs of the investment branch or department are deducted from the Shareholder’s reserves.
The standings balance of the shareholders’ excess, assuming any, is allocated among them.
The organization may contribute its funds just on the basis of profit and loss sharing as instructed by the Shari’ah.
Products and services that are offered by Islamic insurance companies i.e. firms dealing in Takaful
Islamic insurance organizations may offer products that are competitively priced, without diminishing the scope and advantage of insurance coverage made customarily accessible to people in general by local insurance companies.
As far as life insurance facilities are concerned, Islamic insurance companies have created Islamic Trust Funds for social solidarity, mortgage safety, student security and employer’s security.