Definition of Risk: A source of danger; a possibility of incurring loss or misfortune.

The possibility of a premature death, a life-altering disability, or loss of any material possession like a house or a car through fire and theft is a risk all too real to be ignored or left unaddressed. These risks involve significant financial losses that could leave entire families destitute and businesses insolvent in a single blow. Insurance has been the modern way of mitigating these risks through a process of risk transference in exchange of premiums, but not without reservations. Whereas, insurance itself is commendable, its mode of conduct and contract has been a subject of opposition within the parameters of Shari’ah due to the presence of Riba, Gharrar, and Qimar.

Shari’ah View of Risk:

To mitigate risk in order to eliminate or reduce the severity of financial losses is not a recent innovation, and there are ample evidences available in Islamic history in favor of it, for instance:

  1. Dhaman Khatr Al-Tareeq, is when any person personally guarantees another that a particular road is safe to travel and that the liability of any financial losses that might incur along the way is on him; effectively, this is a case of risk transference but without any involvement of fees which makes it acceptable.
  2. Dhaman Al-d’ark, is when any person assures another with personal guarantees to influence the sale by telling the buyer that the guarantor would be responsible for the loss, if the purchased item proved to be faulty. So, in the event of a financial loss, that person (the buyer) has the option to either demand full repayment from the seller or from the guarantor.
  3. Aqila , is when in some situations, the payment of Diyat to the victim’s family is made obligatory on the members of the community and not on the murderer. Effectively, risk is distributed amongst and shared between them as a result.
  4. Aqd Muwala’at , is when any person embrace Islam at the hand of another and then pact an agreement with him or with any third that he will be the inheritor of his wealth after his death, and that all liabilities for his wrongs will be upon him.

All the above-mentioned risk management techniques are based on the principles of brotherhood and mutual solidarity and are in conformance with Shari’ah. Given the importance and need for risk mitigation in today’s day and age, the Ulema, after due deliberation of the pre-existing system (of Takaful), have decided in favor of it as an alternative to conventional insurance on account of its avoidance of Riba, Gharrar, and Qimar in the risk mitigation process.

The Definition of Takaful

The word Takaful originates from the Arabic language and means “joint or mutual guarantee”. The system of Takaful is based on the principles of brotherhood, mutual solidarity, and Taburru   which is encouraged by the Shari’ah. In our society, we have varying implications of Takaful: the joint-family system for one and co-operative societies for another in which risks and financial losses are distributed amongst the participants and help is mutually extended to each other in times of need on the principle of Ta’awun. Exactly the same happens in Takaful, where participants pool their recourses so that they might be able to help each other in the time of need.

Takaful vs. Tawakkul:

 Insurance or for that matter even Takaful is considered by some to be against the Islamic concept of Tawakkul. This belief is actually based on a misunderstanding and therefore not true, for Takaful does not suggest rejecting or abandoning the means or resources, but instead to use various agencies while leaving the outcome to Allah Almighty’s Will. This is what Takaful stands for, and which was also sanctioned by Prophet Muhammad (peace be upon him) in a Hadith where he directs the Bedoiun in the following words having seen him leaving his camel untied considering this as being Tawakkul on Allah Almighty:

A companion of the Prophet (peace be upon him) asked: ‘O Prophet of Allah! Should I tie my camel and then entrust Allah or should I leave the camel untied and then entrust Him?’ The Prophet (peace be upon him) replied: ‘Don’t leave your camel untied; instead first tie the camel and then put your Tawakkul on Allah.’

This event is recorded in Tirmizi as well as in various other books of Hadiths. (2441)

In retrospect we also find that Prophet Muhammad (peace be upon him) and his Companions took medicine in times of illness thus confirming the argument that employing necessary means and resources does not contravene the belief of Tawakkul. It is mentioned in a Hadith:

It is narrated by Hazrat Usama bin Shareek that a Companion of Prophet (peace be upon him) Rizwanullah Alaihim (RA) inquired Prophet Muhammad (peace be upon him): ‘Should we take medicine (when we get sick)?’ Prophet Muhammad (peace be upon him) replied: ‘O People of Allah! Yes, get treatment for your illness because Allah Almighty has made available the remedies of all illnesses except that of old-age.’ (Mishkat 388/2, Ref: Ahmed, Tirmizi, Abu Dawood)

Similarly, the Shari’ah, also commands us to leave behind wealth and property for our families to spare them the disgrace of begging for it from others.

It is better to leave your heirs wealthy rather than poor and asking others for their needs. (Bukhari, 383:1)

This is the true concept of Tawakkul: employing the available agency to our best of ability and leaving the outcome to Allah and every chosen strategy resulting in preventing or easing certain circumstances are thus in conformity with this concept.

Reference of Takaful in Holy Quran & Sunnah

Takaful is not a recent invention. In fact, its reference is available in the Holy Quran and Sunnah. The reference is in connection with the divine commandment for brotherhood and mutual solidarity which is exactly what Takaful stands for.

It is mentioned in the Holy Quran:

Cooperate with one another in matters of righteousness and piety. (Surah Maida: Aayat No.2)

Similarly, it is also mentioned:

Muslims are brothers to one another. (Surah Hujurat: Aayat No.10)


The believers, in their affection, mercy and sympathy to each other, are like the body, if one of its organs suffer and complains, the entire body responds with insomnia and fever.  (Hadith Muslim: 4685)

What is expected from us is that we should cooperate amongst ourselves and become pillars of strength and support for each other in times of difficulties and misfortunes. This is what Islam teaches us, and by following this commandment we can promote the concept of brotherhood in the world, and similarly mutual cooperation, and mutual solidarity. This is exactly what Takaful stands for. In Takaful too, participants extend their support to each other in times of financial misfortunes.

In the sixth year of the Hijri date, the Prophet Muhammad (peace be upon him) made a pact with the Jews of Medina which is generally known as the ‘Meethaaq-e-Madina’. Various clauses of it are extensively mentioned throughout Islamic History and also in various books of Sunnah.

This pact was based on the principles of brotherhood and mutual solidarity and as such one of the clauses states that “every member will have to pay just compensation for their respective tribe”, meaning that the responsibility of freeing the slave will be on the shoulders of those to whose tribe the slave will belong. This is a prime example of the concept of brotherhood and solidarity in Islam.

Such kinds of pacts have been existent during the rule of the Caliphs as well, though not by the name of Takaful. However the spirit of Takaful has always been there: different people through community-pooling help create a common fund which is used to benefit them in times of need.

Therefore, there is no doubt about the permissibility of Takaful given that is functioning on the principles of brotherhood and mutual solidarity and with sincerity.

The Modus Operandi of Takaful

The shareholders firstly would create a Waqf Pool in order to initiate the Takaful activities. Because they had been the ones to establish this Waqf they are called the Waqif, whereas the ownership of the Waqf is transferred to Allah Almighty. People are able to benefit from it for their risk mitigation purposes after acquiring a membership of this Waqf Pool which is legally referred to as the Participants’ Takaful Fund or PTF.

The Shareholders thereafter formulize certain conditions for the Waqf which will form the basis of its operations. Based on the Fiqh ruling, these conditions are judged to be as effective and valid as if they would have been laid out by the Shariah itself. This means that the Waqif, by virtue of its legal position, can therefore stipulate that financial benefits may only be provided to those who contribute to the Waqf Pool. The relationship of the participant and the Waqf on the other hand is merely a relationship of an Aqd-e-Tabarru.

The contributions paid by the participants are recognized as Taburru’at and not as Waqf, and in fact become the property of the Waqf. This is akin to the charity we give to any other Waqf; the charity given is not considered as Waqf but simply as a donation. This means that the participants immediately lose their right of ownership, therefore the laws pertaining Zakat and even the Inheritance law won’t apply here. As mentioned earlier, these contributions become the property of the Waqf with immediate effect and thus benefits from it need to be according to the conditions sanctioned by the Waqif, such as utilizing these contributions for the payment of claims, for example. Hence, it is the Waqf Pool which compensates for the participant’s loss and not the Takaful Operator.

The funds available in the Waqf Pool are invested in Shari’ah Compliant business avenues. Any profits realized from these investments are returned to the Waqf thereafter.

The Role of the Company in Takaful System

The company or the operator serves as the Wakeel or the Manager of the Waqf Fund and charges a ‘Wakala fee’ for it. This fee is paid from the Waqf Fund. As the Wakeel, the Operator must invest the funds available in the Waqf Pool in Shari’ah-compliant businesses for profits on the basis of “Mudharabah”. Since the Operator is the Mudarib (working partner) and the Waqf Fund is the Rabul-ul Maal (sleeping partner), any profits made from the investments are shared between the two on pre-defined percentages.

Income of the Waqf Pool

  1. Contributions paid by the participants
  2. Claim payments received from Re-Takaful Operators
  3. Profits made from investing the funds available in the Waqf Pool
  4. Qard-e-Hasana, paid by the Operator in an event of any Deficit
  5. Miscellaneous donations to the Waqf Pool

Expenses of the Waqf Pool

  1. Claim payments
  2. Re-Takaful payments
  3. Wakala Fee of the Operator
  4. Operator’s percentage in the investment profits made
  5. Portion of surplus which is distributed to the participants
  6. Repayment of Qard-e-Hasana
  7. Any donations paid on the recommendation of Shariah Advisor/Shariah Board

Types of Takaful

There are two classes of Takaful:

  1. Family Takaful
  2. General Takaful
  • Family Takaful or Life Takaful

The participants of Family Takaful mitigate their risks pertaining to their lives by acquiring a membership of the Waqf Fund. In addition to the protection element, participants can also use Family Takaful for their investment needs through another Fund called the Participant’s Investment Account (PIF). A point to remember is that in General Takaful there is no PIF. Family Takaful functions thus:

  1. Contributions received are first credited to the PIF which is used to buy Shari’ah-compliant Investment fund units for the participants.
    • NOTE: The amount available in the PIF belongs to the participants and on which the Islamic rulings of Inheritance and Zakat is applicable.
  2. From PIF, units are allotted for the Participant’s Takaful Fund (PTF) or the Waqf Fund.
  3. The units from the PIF are received by the PTF in the form of Taburru. The amount is different for each participant since it is based on their age, health, occupation, and lifestyle.
  4. The amount available in the PIF, after meeting various expenses (such as participant’s medical check-up), is used by the Operator in the capacity of the Wakeel, under the supervision of the Shari’ah Board, for investment purposes.
  5. The Operator charges a fixed Wakala fee (which is not related to investment profits and is called Wakalatul-Istismar) for the services rendered in investment management the fee is paid from the PIF.
  6. Investment profits are shared between the Takaful participants.
  7. The Waqf Fund compensates for any mishap to the life of a Takaful participant. In a nutshell: the contributions received from the participants are bifurcated into two separate accounts for two different purposes, into:
    • Participant’s Investment Fccount (PIF) for investment purposes; And
    • Participant’s Takaful Fund (PTF)—in the form of Taburru—for risk mitigation purposes.

At the end of every year, after having paid all claims and meeting all expenses, any surplus remaining in the Waqf Fund may be distributed amongst the Participant’s as per the recommendation of the Shari’ah Board. Surplus is paid only to those participants who did not file any claims in the calendar year.

In an event of a Deficit, without increasing the Wakala fee, the Operator extends a Qard-e-Hasana to the Waqf Fund.

  • General Takaful

In General Takaful, the Waqf’s memberships are assigned to those who need to mitigate risks to their assets like airplanes, motors, and houses etc. In an event of any defined loss to the asset, the Waqf Pool compensates. The company sets up the Waqf Pool, manages it, invests the fund available in the pool in Shari’ah-compliant businesses, and charges a fixed Wakala fee in return. Furthermore, the Waqf Pool is also the Rabul-ul-Maal (sleeping partner) and the company acts as the Mudarib (working partner) and any profits made from the investments are shared between the two on pre-defined percentages.

Takaful Glossary


Those contract in which a person is made the owner of something without any consideration.


Those contract in which a person is made the owner of the corpus or the usufruct against some consideration.


Takaful benefits on death of any participant or maturity of his membership.


The amount payable by a participant to an operator under a Takaful membership.


Uncertainty, hazard, chance or risk.


To guarantee, to take care of one another’s needs.


The assests of Waqf (a legal person).


Is a kind of business arrangement in which one party provides the investment while the other offers his labor; profits are mutually shared on predetermined ratios.


A working partner.


Who appoints a wakeel/representative.


Person(s)/organization(s) who deposit by the way of Tabarru in the Waqf fund.

Participant’s Investment Fund (PIF):

The investment pool of participants.

Participant’s Takaful Fund (PTF):

Also known as Waqf Fund, which provides financial support at the occurrence of pre-defined Losses.

Participant’s Membership Documents (PMD):

Means the documents detailing the benefits and obligations of the participant.


Also known as Maysir (Gambling); those commutative agreements in which there is a definite loss for one party and a gain for the other.

Qard al-Hasna:

Interest free loan.


In literal terms, Riba means “excesses”. In the Holy Quran, Riba is purported as any excess or increase against which there is no consideration.


The increase in homogeneous exchange transaction.


A loan with predefined interest.


Shariah-compliant ReTakaful company which provides cover to Takaful pool on the basis of Mudaraba and Wakalah.


Remaining profit of Waqf pool after deduction expenses.

Sum covered:

The amount which is given to the beneficiary on participant’s death.

Shariah Advisory Board (SAB):

The council of Muftyan e Karam which guides Takaful companies as per Islamic laws.

Shariah Guideline:

Regulation approved by the Shariah Advisory Board.

Takaful Operator:

An organization/company that acts as an operator/manager of Takaful fund.


After doing own efforts, putting trust and dependence on ALLAH (SWT).

Wakalah fee:

Waqf pool’s operating fee.


The fee of investment management.

Retakaful Arrangements

Hannover Re

  • TPL Life Window Takaful has made retakaful arrangement with Hannover Retakaful for its Group Family and Individual Life operations.
  • (HRT) is a fully owned subsidiary of the Hannover Re Group. The Group established HRT in 2006 to cater to growing Islamic business, thereby becoming the first major international reinsurance group to devote itself to this emerging market. In 2013, the company set up offices in Labuan, Malaysia to serve the need of the Malaysian takaful market.
  • HRT was set up with an authorized capital of USD 135 million and fully paid up capital of USD 54 million, formally registered on 3 October, 2006 in Bahrain. The company is licensed by the Central Bank of Bahrain to provide retakaful services. It operates internationally offering family, property and casualty retakaful services.
  • HRT conducts all facets of its business strictly in line with Sharia principles as advised by its Sharia Supervisory Board (SSB) which comprises of world renowned Sharia scholars namely Dr. Mohammad Ali Elgari, Mufti Hassan Kaleem and Sheikh Faizal Manjoo.
  • HRT services over 200 partners from Bahrain across the globe. It is the largest retakaful operators worldwide with leading activities particularly in the GCC, Malaysia and North Africa.

Takaful Products

Group Health Takaful

Health is an irreplaceable treasure of life, the one who is deprived values it more than any material thing in the world.

It is for this reason, that we at TPL Life-WTO are trying our utmost to take care of your well being. We have developed the Group Term HealthCare Takaful scheme, which was designed to cater to your medical needs under TPL’s Window Takaful Operations. It covers your hospitalization due to any reason, major medical expenses, maternity/childbirth as well as day to day medical needs.

Let us briefly introduce some of its features.

Hospital Care:

This product covers medical/ hospitalization expenses incurred up to a specified limit that maybe a result of illness, surgery or an accident. In addition to the above, it also covers expenses incurred for treatment outside the hospital or expenses that arise because of day care procedures. Charges of pre & post hospitalization admission diagnostic tests, medications and lab-tests carried out on an out-patient basis are also included in the coverage.

Major Medical Care:

This benefit enhances the limits of Hospital Care; these higher limits provide an extra cushion when a patient has to undergo costly medical treatment like major surgeries and prolonged hospitalizations.

Maternity Care:

The benefit covers medical expenses incurred during childbirth and its complications like cesarean section, D&C and D&E etc.

Out-Patient Care:
This benefit will cover treatment and medical expenses for problems that don’t usually require hospitalization like cough, fever etc.


Group Family Takaful

Group Family Takaful is a risk coverage plan that provides protection to participant employees in the event of death or disability, so that a multiple of that employee’s yearly salary can be paid to his/her family or dependents to ease their financial difficulties. The basic coverage can also be enhanced by adding coverage of risks that are arising out of a natural calamity or by unpredictable accidents.

The Plan is either contributory or sponsored by the employer/company as a yearly renewable agreement. The benefit provides payment of the agreed coverage amount in the event of death, due to any cause, of a participant employee.

Along with this plan employees can be provided with any of the following additional coverage;

Group Accidental Death Family Takaful

Accidents are always sudden and sometimes fatal. You can’t lessen the emotional shock, but you can certainly soften the financial one. Group Accidental Death Family Takaful Benefit gives the loved ones something to start with after the permanent loss of income by paying an additional coverage amount.

Group Permanent Partial Disability Family Takaful

Accidents are unpredictable and so are the consequences. They may lead to a disability which is partial but permanent. This benefit provides a financial cushion against such events; the participant gets a particular amount in case of an eventuality as per the specified schedule.

Group Permanent Total Disability Family Takaful

An accident can be the cause of a disability which is permanent and total. This benefit provides a financial cushion in such situations to a participant where he/she is unable to earn his living. The permanent disability payouts are a percentage, according to a specified schedule, or the full amount of coverage to the participant according to the nature of loss.

Group Temporary Total Disability Family Takaful

In a situation where the participant is fortunate enough to escape from a major injury of a permanent nature and is temporarily disabled for a short period in an accident, the benefit will cover for the loss of wages in the shape of a weekly payment of an agreed amount during the whole period of disability, till the time he regains health and resumes work.

Group Natural Disability Family Takaful

Health is a gift of Allah, but it’s unpredictable when one will be deprived of this blessing. The benefit provides coverage to a participant if he becomes permanently and totally disabled due to natural causes after which he is unable to perform his duty for which he is trained or experienced. This benefit provides payment of the whole sum covered.

Group Accidental Medical Expense Family Takaful

If a participant suffers an injury due to an accident, this benefit will cover the medical expense, up to a specified amount, during the period of hospitalization and or medical treatment.

Frequently Asked Questions

What is Takaful Operator?

Takaful Operator is an organization which manages Takaful Fund and takes up the responsibility of determining contribution amount, collection of contributions and paying claims to eligible Participants. In this role, the Takaful Operator charges ‘Wakala’ fee for its services.

What are the controlling documents for Takaful as per the regulation?

Following are a set of controlling documents for Takaful:

  • Insurance Ordinance 2000
  • Insurance Rules 2002
  • Takaful Rules 2012

Who is the regulator for Takaful in Pakistan?

Securities and Exchange Commission of Pakistan is the regulator for all insurance and Takaful companies in Pakistan

What is meant by Contribution?

Contribution means the amount payable by the participant to an operator under a Takaful contract

What is Wakala Fees?

The term ‘Wakala’ (Agency) is derived from the word ‘Wakeel’ (Agent). It is the fee incurred by a Takaful Operator from the Participants Takaful Fund to manage the Takaful Fund

What is meant by Participant?

Participant means a person who participates in a Takaful scheme and to whom a Takaful Contract is issued

How are the contributions invested?

The contributions are invested in Shariah compliant mutual funds. The investments have the approval of the Shariah Advisor/Shariah Board of TPL Life Insurance, Window Takaful Operations.

Is Risk Protection (insurance) against Tawakkul (total dependence upon Allah (SWT))?

No human actions change the Will of Allah (SWT) for our destiny. Whether a person has insurance/Takaful or not has no effect on future events. However, we are instructed to take precautions and then fully trust and depend upon Almighty Allah (SWT): In a Hadith narrated by Anas bin Malik, one day Prophet Muhammad (PBUH) noticed a Bedouin leaving his camel without tying it. He (PBUH) asked the Bedouin, “Why don’t you tie down your camel”? The Bedouin answered, “I put my trust in Allah (SWT)”. The Prophet (PBUH) then said, “Tie your camel first, then put your trust in Allah (SWT)”. [As quoted in Sunan At-Tirmidhi, 1981.]

Is all Risk Protection (insurance) Haraam (prohibited)?

The Fiqh Council of World Muslim League (1398/1978) resolution and The Fiqh Council of Organization of Islamic Conference (1405/1985) in Jeddah resolved that conventional insurance as presently practiced is Haraam, and that cooperative insurance (Takaful) is permissible and fully consistent with Shariah principles. Hence, conventional insurance is prohibited for Muslims (because it contains the elements of Riba, Al Maisir, and Al Gharar). By contrast, Takaful provides risk protection in accordance with Shariah based on the principles of Ta’awun (mutual assistance), brotherhood, piety and ethical operations.

What is the difference between Takaful and Insurance

Differences between Conventional Insurance and Takaful

Point # 1: The fundamental difference between conventional insurance and Takaful is the “Change of nature of contract” from Aqd-e-Muawaza to Aqd-e-Taburru. This has eliminated Riba; and Rendered Gharar and Qimar/Maysir Ineffective

Point # 2: Contributions goes into the Waqf Fund & Waqf Fund belongs to Allah (SWT)

Point # 3: The Waqf Fund pays the claims

Point # 4: Contributions are invested only in Shari’ah Compliant business avenues

Point # 5: An independent Shariah Advisor/Shariah Board supervises business activities for Shariah compliance

TPL Offices


Head Office
33-C, Shahbaz Commercial Area, Lane 4, Phase VI, DHA-Karachi-75500
UAN: +92 111-000-330


51-M, Denim Road, Quaid-e-Azam Industrial Estate (Kot Lakhpat), Lahore.
UAN: +92-42-111-000-300
FAX: +92-42-35157233


10th Floor (South), ISE Towers, 55-B, Jinnah Avenue, Blue Area, Islamabad.
UAN: +92-51-111-000-300
FAX: +92-51-2895073


House No. 2, Shalimar Colony, Haider Street, near Sardar Motors, Bosan Road, Toyota Bypass, Multan.
UAN: +92-61-111-000-300
FAX: +92-61-4424351


Office No. 4-02, 4th Floor, Mezan Executive Tower, Civil Lines, Faisalabad.
UAN: 041-111-000-300
Phone: +92-41-8501471-3
Fax: +92-41-8501470


A-8 District Council Complex, Hyderabad.
Phone: +92-22-2728676
FAX: +92-22-2783154


C-7 & C-8, 3rd Floor, Jasmine Arcade, Fakhr-e-Alam Road, Peshawar Cantonment, Peshawar.