Takaful - Purpose of Family Takaful

Family Takaful is a long-term Takaful arrangement designed to help participants meet their future financial needs while also providing financial protection against specified risks.

Unlike short-term protection, Family Takaful commonly operates over a long period because many important financial goals require years of planning and accumulation.

1. Long-Term Savings and Financial Planning

Many participants use Family Takaful to accumulate savings or investments for future needs.

Common objectives include:

children’s education

retirement or pension needs

long-term savings

and other future financial commitments.

For example, Ahmad may participate in a 20-year Family Takaful education plan to accumulate money for his child’s university education.

Therefore:

Regular Contributions → Savings/Investment → Long-Term Financial Goal

2. Children’s Education

One important purpose of Family Takaful is to prepare financially for:

Children’s Future Education

For example, Sarah has a five-year-old child and expects university expenses to arise in approximately 13 years.

A Family Takaful education plan can help Sarah accumulate funds over this period.

Where the product contains a savings component:

Contribution → PIF/Investment Account → Investment → Education Savings

At the same time, the protection component can help protect the education objective if a specified covered event occurs.

3. Retirement or Pension Needs

Family Takaful can also help participants prepare financially for:

Retirement

For example, Ahmad is 40 years old and intends to retire at 60.

He has:

20 years

to accumulate retirement resources.

Regular savings and investment over this period can build funds for use after retirement.

Therefore:

Working Years → Regular Savings/Investment → Accumulation → Retirement Funds

In this case, the participant is primarily saving for his own future financial needs.

4. Protection of Dependants in the Event of Death

Family Takaful is not only about saving.

It can also provide financial protection for the participant’s:

Dependants

Suppose Ahmad is the main income earner for his family.

His spouse and children depend on his income for housing, food, education and other living expenses.

If Ahmad dies during the covered period, his future income disappears.

The applicable Family Takaful death benefit can provide financial assistance to his beneficiaries or dependants according to the certificate.

Therefore:

Participant Dies → Family Loses Income → Takaful Benefit Provides Financial Support

In this situation:

Person Covered = Ahmad

but:

Persons Financially Protected/Benefiting = Ahmad’s Dependants or Beneficiaries

5. Protection in the Event of Disability

Family Takaful can also provide protection against specified forms of:

Disability

Suppose Ahmad becomes permanently disabled and can no longer work.

Ahmad is still alive, but his ability to earn income may be significantly reduced.

A disability benefit can therefore provide financial assistance according to the certificate terms.

The protection may directly help:

The Participant

and indirectly help:

The Participant’s Dependants

because the family may also depend on the participant’s income.

6. Family Takaful Therefore Has Two Broad Objectives

The statement can be understood through two main functions:

A. Long-Term Financial Accumulation

For objectives such as:

children’s education

retirement

future savings

This is generally associated with the:

PIF/Investment Component

where the particular product contains savings or investment.

B. Financial Protection

For risks such as:

death

disability

and other covered events.

This is associated with the:

PRF/Tabarru’ Component

Therefore:

PIF = SAVE FOR FUTURE NEEDS

PRF = PROTECT AGAINST COVERED RISKS

7. Complete Example

Suppose Fatimah enters a:

20-Year Family Takaful Plan

Her objectives are:

save RM100,000 for her child’s education

and:

protect her family if she dies or becomes disabled before completing the savings period.

Part of the applicable contribution may go toward:

PIF → Savings/Investment → Child’s Future Education

while the protection portion goes toward:

Tabarru’ → PRF → Death/Disability Protection

If Fatimah completes the plan, the accumulated savings can be used for the intended financial objective.

If Fatimah dies during the covered period, the applicable Takaful protection can provide financial assistance to the relevant beneficiaries/dependants.

If Fatimah suffers a covered disability, the applicable disability protection may provide financial assistance according to the certificate.

Easy Way to Remember

SAVE + PROTECT

SAVE for:

Education + Retirement + Future Needs

PROTECT against:

Death + Disability + Other Covered Risks

Therefore:

Family Takaful = Long-Term Financial Planning + Family Financial Protection

One-Sentence Summary

Family Takaful is a long-term Takaful arrangement that can help participants accumulate savings or investments for future needs such as children’s education and retirement while also providing financial protection for the participant and/or the participant’s dependants against specified covered events such as death and disability.