Takaful - Protection for Motor Policyholders and Employees

Motor insurance or motor takaful does not only provide protection to third parties. Depending on the type of coverage purchased, it may also protect the policyholder or takaful participant against loss or damage to his or her own vehicle.

Motor Insurance and Takaful Protection

Under third-party motor insurance or takaful, the main purpose is to protect the vehicle owner or driver against legal liability arising from injury, death, or property damage caused to another person.

In this situation, the policyholder or participant may not receive compensation for damage to his or her own vehicle. Instead, the insurer or takaful fund pays eligible claims made by the third party, subject to the terms and conditions of the policy or certificate.

Comprehensive Motor Protection

Under comprehensive motor insurance or takaful, the policyholder or participant receives broader protection.

This type of coverage may protect the participant’s own vehicle against risks such as accidental damage, fire, theft, and other covered events. It also generally includes protection against legal liability to third parties.

Who buys the coverage?

The vehicle owner or policyholder normally purchases the motor insurance policy or participates in the motor takaful plan.

Who is protected?

The policyholder or takaful participant is protected against covered damage to his or her own vehicle under comprehensive coverage. At the same time, third parties may also receive compensation if the policyholder becomes legally liable for injury, death, or property damage.

What is covered?

Depending on the type of plan, the protection may include:

• damage to the participant’s own vehicle;
• theft or fire involving the vehicle;
• legal liability for injury or death caused to third parties; and
• legal liability for damage to third-party property.

Practical Example:

Ahmad owns a car and purchases comprehensive motor takaful. He accidentally collides with another vehicle. His own car is damaged, and the other driver’s car is also damaged.

The takaful arrangement may pay for the eligible repairs to Ahmad’s own car and may also cover his legal liability for the damage caused to the other vehicle, subject to the terms of the takaful certificate.

Employment Protection

For employment-related protection, the employer usually arranges and pays for the insurance or takaful coverage, while the employee is the person who receives the main protection or benefits.

The employer may therefore be the policyholder or takaful participant, while the employees are the insured or covered persons under the arrangement.

Who buys or pays for the coverage?

The employer generally arranges the protection and pays the insurance premium or takaful contribution.

Who is protected?

The employee is usually the main person protected against the financial consequences of work-related injury, disability, or death.

The employer may also receive protection against certain liabilities arising from workplace accidents, depending on the type of insurance or takaful arrangement.

What is covered?

Depending on the applicable scheme, the protection may include:

• medical expenses;
• compensation for work-related injury;
• temporary or permanent disability benefits;
• loss of income benefits; and
• death benefits payable to eligible dependants.

Practical Example:

ABC Construction Company employs 50 workers and arranges employment-related insurance or takaful protection for them. The company pays the required premium or takaful contribution.

If one employee falls from scaffolding while performing his work and suffers a serious injury, the employee may receive medical or disability benefits according to the applicable coverage and legal requirements.

Key Difference

In motor insurance or takaful, the vehicle owner is usually both the person who buys the coverage and one of the parties protected, especially under comprehensive coverage.

In employment protection, however, the employer usually buys and pays for the coverage, while the employee is the main person who receives the benefits when a covered work-related injury occurs.