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This is an introductory guide to help you understand how motor takaful works. It gives you some basic information so that you can ask your takaful operator the right questions, understand the answers and make the right choice before you participate in any takaful plan.
What is motor takaful?
A motor takaful plan covers you against loss or damage to your own vehicle due to accidental fire, theft or accident; and/or third party bodily injury or death, third party property loss or damage. Cover against third party risks in Malaysia was made compulsory under the Road Transport Act 1987. It is an offence for any person to use or cause or permit any other person to use a motor vehicle without the necessary coverage.
Takaful concept in motor takaful
When you participate in motor takaful, you contribute a sum of money to a general takaful fund in the form of participative contribution (tabarru'). You undertake a contract (aqad) for you to become one of the participants by agreeing to mutually help each other, should any of the participants suffer a loss because of an accident involving his vehicle. At maturity, you are entitled to a share of the surplus in the general takaful fund, if you did not make any claim during the period of takaful. The surplus will be shared between you and the takaful operator under the concept of surplus-sharing according to a pre-agreed ratio. Example: A takaful operator has a total surplus (S) of RM4 million and total general contribution (GC) of RM10 million. Your contribution (C) for the year is RM1,000 and the surplus will be shared between you and the takaful operator at a pre-agreed sharing ratio (PSR) of 50:50. The share of surplus that you will receive is calculated as follows: