Takaful - The Final Layer of Risk Management

• Insurance should be the final stage of risk management, not the first.
• Principle: “Tie your camel first, then place your trust in God.”
• Risks should first be:
• Identified
• Prevented
• Reduced or controlled
• Insurance should then be used to protect against the financial impact of possible losses.
• Preventing a loss is always better than receiving compensation after a loss occurs.
• Insurance money may not fully replace:
• Property or assets lost
• Emotional or personal losses
• Other consequences of an unfortunate event
• However, insurance compensation can help the insured recover financially more quickly.

Takaful

• Takaful is the Shari’ah-compliant alternative to conventional insurance.
• The takaful operator is not the insurer of the participants.
• Participants contribute to a common takaful fund.
• Takaful participants mutually protect and support one another against specified losses.
• The takaful operator manages the arrangement according to Shari’ah principles.