The several effects that this pandemic has brought with it are still changing rapidly and are extremely severe and harsh. Hence, it is during such times that we realize how important and valuable it is for us to protect our lives as well as our livelihoods.
One thing that this outbreak has taught everyone is that do not overlook life insurance or health insurance no matter what the circumstances. Life is unpredictable and hence you must be prepared for whatever possible that could come your way. However, while choosing how to have yourself covered it is vital for buyers of insurance coverage policies to understand the benefits and advantages they can derive from the various insurance products that are up for grabs in the market from insurance companies in Pakistan.
This leads us to branch out and explore Islamic insurance or takaful which is primarily based on the foundations of help. Takaful, derived from the word kafalah refers to a joint guarantee, takes into account the principles of mutuality where there is shared responsibility, interest as well as solidarity. Furthermore, it also focuses on how unforeseen events can lead to various losses.
What does a Takaful policy do?
A takaful policy entails and incorporates a cooperative model with shared risk. Through this people who have purchased this policy pitch in their money in a pool of funds. The benefit is only derived if the pool results in a surplus. The assets are very clearly divided with clear demarcation and segregation between those of the insurer and those of the policy owner. Moreover, the risk is then managed by the insurance company of the takaful policy.
How are operational risks handled?
Since takaful benefits are derived when the pool goes into a surplus, when it does not and instead goes into a deficit in order to pay the loans a zero-interest loan is taken up. This is known as “Qard Hassan” and is then repaid from the future surpluses that will arise. If for example there are no surpluses then this loan is also forgiven.
Insurance has now become vital. It has become more important with time especially with this ongoing global pandemic and has been classified as a necessity. Hence, the demand for sharia-compliant insurance coverage has just risen and increased over time as the Islamic principles lay great emphasis on ethical, moral, and social values and promote equality in society.
In compliance with the basic principles of Sharia the cooperative model is gaining popularity throughout the world. As expected, the demand for takaful policies is expected to grow to $40 billion by 2023. Takaful policies have become way more popular and their popularity is constantly increasing. Hence, buyers of insurance coverage plans should take it into account as insurance has now become unavoidable, especially health and life insurance.