Takaful - Types of Risk and Who Is Protected

1. Trade and Commerce

• Example: Goods transported by sea are damaged during a storm.
• Type of risk:
• Cargo risk
• Property damage
• Transportation risk
• Who is protected:
• Cargo owner
• Importer or exporter
• Trader
• Shipping company

2. Finance

• Example: A factory financed by a bank loan is destroyed by fire.
• Type of risk:
• Property risk
• Fire risk
• Credit or loan repayment risk
• Who is protected:
• Borrower or business owner
• Bank or financier
• Insurance helps the borrower recover and also reduces the lender’s risk of non-repayment.

3. Mandatory Insurance

• Example: A driver causes a road accident and injures another person.
• Type of risk:
• Liability risk
• Bodily injury risk
• Third-party property damage
• Who is protected:
• Injured third party
• Owner of damaged property
• Insured driver against financial liability

4. Family Stability

• Example: The main breadwinner of a family dies unexpectedly.
• Type of risk:
• Death risk
• Loss of income
• Financial hardship
• Who is protected:
• Spouse
• Children
• Other dependants
• Insurance or family takaful can provide financial support to help the family maintain its living expenses.

5. Business Stability

• Example: A key employee, manager, or business owner dies.
• Type of risk:
• Key-person risk
• Business interruption risk
• Financial loss
• Who is protected:
• Business
• Business owners
• Employees
• Creditors
• Key-person protection can help the business continue operating and reorganise after the loss of an important person.

Quick Summary

• Trade & Commerce → Cargo/property risk → Protects businesses and traders
• Finance → Property and credit risk → Protects borrower and financier
• Mandatory Insurance → Liability risk → Protects third parties and insured
• Family Stability → Death and income-loss risk → Protects family members
• Business Stability → Key-person risk → Protects the business