Keeping things crystal clear

You may be someone who is comfortable with Shariah principles. You may be someone who is completely unfamiliar with the concept and terms. Whoever you may be, we have a glossary of Takaful terminology that will come in handy.

Amal Jariah

Continuous charity. It refers to any charity which has the long lasting benefits to the recipients.




The paternal relatives who pay the blood money. The doctrine of al-'aqilah had been practiced among the ancient Arab tribes, in whichit was an implied mutual agreement among the tribes that if anyone is killed unintentionally by a person of a different tribe, the slainer's paternal relative used to take the responsibility to make a mutual contribution for the purpose of paying the blood money on behalf of the saline, to the victims' relatives. This doctrine later got recognition by Prophet Muhammad (peace be upon him) in one of his judgments against a woman from the tribe of Huzail. This is a foundation doctrine based on which today's takaful practices have been developed.


The speech of Allah sent down upon Prophet Muhammad (peace be upon him) in its precise meaning and precise wording and transmitted to us by numerous people (mutawatir).

Average clause

Clause which stipulates that a Takaful fund is only liable for such proportion of the loss as the sum covered bears to total value at risk.


Promotion and marketing of takaful products by the banking institutions.


Notification to a Takaful operator that payment of an amount is due under the terms of the certificate.

Certificate document

An evidence of a contract between a participant and a Takaful operator which sets out the terms and conditions of the particular certificate.

Claims ratio

The ratio of net claims incurred to earned contributions.


Necessity. It is a situation in which a person is obliged to resort to the unlawful and if he does not do that he will be in great danger or even lose his life.



Expense rate

The ratio of total expenses for the year (including commissions, salaries, etc) to the sum of total contribution income other than single contribution and consideration for annuities.

Excess of loss treaty

A type of reTakaful treaty which provides that the reTakaful operator pays all or a specified percentage of a loss arising from a particular occurrence or event (frequently of a more or less catastrophic nature) in excess of a fixed amount and up to a stipulated limit.

Earned contribution

Net contributions less provision for reserves for unearned contribution (RUC) at the year-end income plus the RUC at the beginning of the year.

Facultative Retakaful

A retakaful contract under which a ceding Takaful operator has the option to cede and the retakaful operator has the option to accept or decline individual risks.


unsound or unviable or vitiated. A forbidden term in a contract, which consequently renders the contract invalid.


religious decree or an authoritative legal opinion based on Islamic law (Shariah).


Islamic jurisprudence.

Fiqh al-Muamalat

Islamic commercial jurisprudence or jurisprudence of financial.

Gross direct contributions

Contributions on original gross rate charged to clients in respect of direct Takaful business without any deduction for commission or brokerage.

Group family Takaful

Family Takaful (usually without medical examination) on a group of people under a master certificate. It is typically issued to an employer for the benefit of employees, or to members of an association.

General Takaful

Protection to participant for losses arising from perils such as accident, fire, flood, liability and burglary.


Uncertainty. It is used to denote any element of absolute or excessive uncertainty n any business or about the subject of a contract or its price, or mere speculative risk. It has potential to lead to undue loss to one part of a contract and unjustified enrichment of another, which is prohibited.

Gharar fahish

Major uncertainties.

Gharar yasir

Minor uncertainties.


Sayings, deeds and endorsements of Prophet Muhammad (peace be upon him) narrated by his companions. It is the highest authority of source in Islamic law after Al-Quran.


lawful, permissible.


unlawful, forbidden.


A gift. It signifies a transfer of a certain property without any material consideration.

Householders takaful & Houseowners takaful

Takaful coverage for residential property against loss or damage caused by perils such as flood or earthquake. It does not only covers house, but also the garage, outbuildings, walls, gates, fences, as well as permanent fixtures and fittings. It does not cover buildings used for commercial purposes, such as restaurant, factory or place for storing merchandise.

Ibahah / Mubah

Anything that is permissible to performed and for which there is no reward for doing and no punishment for leaving.


A consensus of all qualified jurists on a certain Shariah matter in a certain age.


The endeavor of a qualified jurist to derive or formulate a rule of law that he/she believes to be the true ruling of the divine law on a matter which the revelation is not explicit or certain, on the basis of evidence found in Al-Quran and Hadith.

Incurred but not reported (IBNR)

Losses which have occurred during a stated period, usually a financial year, but have not yet (IBNR) been reported to the Takaful operator as of the date under consideration.


Restoration to the claimant of a loss by payment, repair or replacement.

Individual Family Takaful

A contract that provides Takaful benefits payable to an individual upon death/ total permanent disability or periodic income to participant upon retirement.

Ju’alah / Ji’alah

Literally means wage contract. It is a compensation given for a service rendered. It is also known as performance fee. In the context of takaful, a takaful operator receives a portion of distributable surplus arising from takaful fund based on the contract of ju'alah / ji'alah for operating and managing the takaful fund.


Guarantee or surety. It is also known as daman.



Maqasid al-Shari'ah

Objectives of the Shari'ah. Shari'ah aims to promote benefits and remove harm in the life of mankind.


Benefit, interest.


Gambling. It refers to any activities which involve betting, whereby the winner will take the entire bet and the loser will lose his bet. It is also known as Qimar.

Medical and Health

A contract that provides specified medical treatment benefits such as the cost of hospitalization, Takaful surgical and physician consultation fees against risks of a person being diagnosed with certain illnesses or suffering injury as the result of an accident.

Mortality table

A statistical table showing the death rate at each age, usually expressed as the number of deaths per thousand.


Dealings between humans including economic transactions related to exchange of goods and services and financial transactions.


An agreement between the entrepreneur and the capital provider in a business venture to share profit based on an agreed profit sharing ratio. Losses are borne by the capital provider.

An investment partnership with profit loss sharing implications. One or more partners as investors (rabb al-mal) provide all the capital to an entrepreneur (mudarib) to undertake a business activity. Profit is shared between the partners on a pre-agreed ratio; any loss is borne only by the rabb al-mal.


entrepreneur in a Mudarabah contract.

Net claims

Incurred net claims paid less provisions for outstanding claims beginning of the year plus provisions for outstanding claims at the end of the year.

Net contributions

Gross contributions less all reTakaful contributions payable.

Net investment

Income returns on investments less rates and taxes.


Exemption limit for the payment of Zakat, which differs for different types of wealth.



Participants' investment fund (PIF)

An account to credit a portion of contributions from the participant for the purpose of investment/savings.

Participants' risk fund (PRF)

An account to credit a portion of contributions from the participants for the purpose of mutual financial benefits payable to participants upon agreed events based on the concept of tabarru'.

Person covered

A takaful participant or other person in respect of whom the takaful participant enters the contract of takaful and in respect of whom takaful benefits are payable to the takaful participant or his beneficiaries on the occurrence of pre-agreed events under the contract of takaful (Section 2, Islamic Financial Services Act 2013).

Proper claimant

A person who claims to be entitled to the whole or part of the takaful benefits under a takaful certificate as executor of the deceased takaful participant, parent or guardian of an incompetent nominee or an assignee or who claims to be otherwise entitled to the takaful benefits under the relevant law (Section 2, Islamic Financial Services Act 2013).

Proportional treaty

A contract under which a Takaful operator and a retakaful operator participate proportionately in the contributions and losses on every risk that comes within the scope of the contract.



Qard Hasan

Benevolent loan or interest free loan.

Qawa'id Fiqhiyyah

Islamic legal maxims.


Analogical deduction. It means a derivation of the law on the analogy of an existing law if the basis ('illah) of the two is the same. It is one of the sources of Islamic law.

Quota share

The basic form of participating treaty whereby the reinsurer / retakaful operator accepts a stated percentage of each and every risk within a defined category of business on a pro rata basis.

Rab al mal

Capital provider or investor in a Mudarabah contract.


A contractual arrangement under which the retakaful operator will be liable for part or all of the risks which the takaful operator has covered. The takaful participants' legal right will not be affected by the retakaful arrangement and the takaful operator is required to pay the claims to the participants as per takaful certificate's terms and conditions.

Retention ratio

The ratio of net contributions to gross direct and retakaful accepted contributions less retakaful within Malaysia.


Interest / usury. Technically, it refers to any excess compensation without any corresponding counter-value recognized by the Shari'ah.

Riba al Buyu’

Usury in sales. It also known as riba al-fadl. It takes place in an unequal exchange in goods of the same genus and delivery is delayed. To avoid riba al-buyu', the exchange of commodities from both sides must be equal and instant.

Riba al Duyun

Usury of loans. It is also known as riba an-nasi'ah. It takes place when it is stipulated in a loan contract that the borrower pays to the lender an interest in return for allowing a delay in repayment. More time is permitted for repayment in return for an additional interest. If the borrower fails to pay, a further interest will be imposed.




An attachment to a certificate that modifies its conditions by expanding benefits.


Charity given for the sake of Allah.


Literally means a way or path. It commonly refers to Islamic laws.


It refers to whatever was reported that Prophet Muhammad (peace be upon him) said, did or gave his tacit approval.


The excess of the participants' fund carried forward less actuarial liabilities. Good and effective management of takaful funds' operations would ensure that the funds' experience is within that assumed in the pricing of the takaful products. Where the experience is better than that expected, there should be a surplus. (Paragraph 10.20, Guidelines on Takaful Operational Framework).

Surplus at valuation date

Excess of the Takaful fund carried forward over the actuarial liabilities of a Takaful fund of family Takaful business.


Contract of charity or donation, the purpose of which is not commercial but to seek the pleasure of Allah.


An arrangement based on mutual assistance under which takaful participants agree to contribute to a common fund providing for mutual financial benefits payable to the takaful participants or their beneficiaries on the occurrence of pre-agreed events (Section 2, Islamic Financial Services Act 2013).

Takaful annuity

A contract that provides a stream of periodic income upon retirement for a term dependent upon human life. Takaful benefits- Includes any benefit, whether pecuniary or not, which is payable under a takaful certificate (Section 2, Islamic Financial Services Act 2013).

Takaful claim

A demand for payment of an amount due under a takaful certificate (Section 2, Islamic Financial Services Act 2013).

Takaful contribution

The amount payable by a takaful participant to a takaful operator under a takaful certificate and includes any remuneration for the functions and duties assumed by the takaful operator (Section 2, Islamic Financial Services Act 2013).

Takaful fund

A common fund contributed by takaful participants and maintained by a licensed takaful operator which is separate from takaful operator's shareholders' fund.


Insurance contract. Usually it refers to the conventional insurance whereas 'ta‘min Islami' refers to takaful.

Total loss

A loss of sufficient size so that it can be said there is nothing left of value.


Selection of takaful participants according to the company's risk standards.

Underwriting profit / loss

Earned contribution income less net claims incurred, commissions and management expenses.

Unearned contribution

Contributions already received in respect of risks which are still unexpired at the end of the reserves accounting period.


Fee. The financial charge for using services, or manfaat (wages, allowance, commission, etc.)

‘Uqud al-Mu’awadhat

Contracts of exchange.






Contract of agency.




Endowment or charitable trust.






Compulsory alms. It is a particular amount of property that must be paid to particular recipients (asnaf) every year.