1. Takaful (derived from the Arabic word which means ‘joint guarantee’) refers to a mechanism of sharing of risks and profits in the community. It promotes solidarity, of helping one another in calamities where the participants contribute to a fund for the purpose.
2. Basically, takaful refers to risk sharing between the participants while insurance refers to risk transfer mechanism from the insured to the insurance company.
3. It is fundamentally different from conventional insurance whereby the takaful operator (insured) does not own the takaful fund – the contributions (premiums) paid by the public belongs to them (to share the risk) – the takaful operator only manages the fund for a fee and share of the profits from the fund, if any. For this purpose, all eligible customers of the company who have not made a claim will be entitled to a share of the profit of the takaful fund, payable after the end of the certificate period.
4. Essentially, this means that all participants of takaful will either enjoy the benefits of insurance through claims made, and if no claims are made, they are entitled to a share of the surplus (profit) from the takaful fund.
5. In conventional insurance practice, whatever surplus or profit from the insurance fund belong entirely to the insurance company.
6. As a company which promotes ethical practices, Noor Takaful does not write risks such as gambling premises, alcohol, prostitution, bars, etc.