Sharia Insurance: Advantages of Sharia Insurance

Sharia Insurance is insurance based on sharia principles with help-to-help efforts (ta'awuni) and mutual protection (takafuli) among Participants through the formation of a pool of funds (Tabarru 'Fund) which is managed according to sharia principles to face certain risks. Here are some definitions in Islamic insurance as follows:

A contract is a written agreement that contains certain agreements, including the rights and obligations of the parties in accordance with sharia principles.

Akad Tabarru 'is a grant agreement in the form of granting funds from one Participant to the Tabarru Fund' for the purpose of help between the Participants, which is not for commercial purposes.

Akad Wakalah bil Ujrah is a Tijarah Contract which authorizes the Company as a Participant's representative to manage the Tabarru 'Fund and / or Participant Investment Fund, according to the power or authority given, in return for a ujrah (fee).

Mudharabah Agreement is a contract to provide profit sharing for Tabarru 'Fund investments.
Contributions are a number of funds paid by Participants to the Company, some of which will be allocated as Tabarru 'contributions and others as fees (ujrah) for the Company.

Tabarru 'Funds Contribution is a portion of contributions paid by Participants which are then included in the Tabarru' Fund Collection with Tabarru 'Contract.

Tabarru 'Fund is a collection of funds derived from the contributions of the Participants, whose mechanism of use is in accordance with the agreed Tabarru' Agreement.

Surplus / Underwriting Deficit is the difference of more / less than the total contribution of Participants into the Tabarru 'Fund after deducting compensation payments / claims, reinsurance contributions, and technical reserves, in a certain period.

Advantages of Sharia Insurance

1) Transparency of Takaful Participant Fund Management with an agreement that is clear and transparent as well as aqad in accordance with sharia, tabarru 'funds will be managed professionally by Islamic insurance companies through shariah investment based on sharia principles.

2) Islamic Participant Fund Management by avoiding Riba (Interest), Maisir (Gambling) and Gharar (Unclear).

Sharia insurance avoids conventional insurance functions that contain Riba (Bunga) Maisir (Judi) and Gharar (Unclear). Tabarru 'funds will be used to deal with and anticipate disasters / claims that occur among insurance participants. Through Islamic insurance, you can prepare yourself financially while maintaining the principles of transactions that are in accordance with Islamic fiqh. So there is no doubt about sharia insurance.

3) The existence of Underwriting Surplus Surplus Allocation and Distribution

a. In the event of an Underwriting Surplus, the Participant agrees to allocate the Underwriting Surplus as follows:

• 50% for the Tabarru 'Fund Collection;

• 20% for Participants who meet the criteria;

• 30% for the Company as an operator.

b. Underwriting surplus will be distributed to Participants no later than 90 calendar days after the calculation is complete.

c. Distribution of Underwriting Surplus results is only given to Participants who fulfill the following conditions:

• Participants never submit claims in the calculation of the underwriting surplus / deficit.

• Not being filed a claim on the calculation date of the underwriting surplus / deficit.

d. If the Underwriting Surplus amount to be distributed to each Participant is less than Rp. 50,000, then the Underwriting Surplus is included in the Tabarru Funds' collection.