Islamic Life Insurance: Benefits of Sharia-Based Coverage
Islamic life insurance gives you and your family full protection under Sharia principles. See the key benefits and how the shared Tabarru fund works.
Islamic Life Insurance: do you want insurance that follows Islamic principles? You can choose life insurance based on Sharia (Islamic law). If you would rather not take out conventional insurance, this is the alternative. Even though the model is Sharia-based, you still get maximum protection for yourself and your family, along with a number of other benefits. The concept differs from conventional insurance: in Sharia insurance, the risk is shared equally among all participants. Policy terms also vary from one insurer to another. So before you join Panin's Sharia-based insurance, make sure you understand the policies that company applies. Here are the benefits of Islamic life insurance you should know about:
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Full Protection
Despite the name, Islamic life insurance still gives you and your family full protection. You can be covered for death, accidents and disability. The funds the insurer receives are handled in line with Islamic law. Incoming funds are used to protect the participants, and they come from the contributions that participants pay on a regular schedule.
Benefits of the Shared Account
The concept of Sharia insurance differs from conventional insurance. In conventional insurance, the risk and the profit both sit with the insurance company, and policyholders can transfer their risk to it. With Sharia-based insurance, the risk is not transferred to the company. Instead, the risk a participant faces is shared equally by the other participants. Participants pay a fund called a contribution, and it is held in a shared account known as Tabarru. The Tabarru account does not belong to the insurance company.
More Flexible Payments
Another difference between conventional and Sharia-based insurance is that payments are more flexible. The dues, or contributions, each participant pays can be set according to your needs. Participants in Sharia insurance face one of two possible outcomes. The first is a surplus, where contributions are larger than the claims paid. The second is a deficit: if you file claims larger than the contributions you have paid, you end up with a shortfall. These two outcomes set Sharia insurance apart from conventional insurance. To receive a share of the surplus, certain rules apply. Of the contributions paid, 60% stays in the shared account, 30% goes to the participants and 10% goes to the insurance company.
Fostering a Sense of Community
Another benefit of joining Sharia-based life insurance is that it nurtures a sense of social responsibility. When another participant suffers a misfortune, your contribution in the shared account is used to help that participant.
If you do not want conventional insurance, you can choose Sharia-based life insurance. One recommended option is Panin Dai-ichi Life. Panin Dai-ichi Life holds firmly to Islamic principles in its Sharia insurance. The insurance product you can choose is Multilinked Syariah. Its main advantage is that you can plan your finances up to age 80.
