This article is part of a helpful series explaining Takaful terms.
Today, we’re focusing on the term Wakalah, so that you understand what it means and how it relates to our EZTakaful products.
Wakalah is an Arabic word describing the relationship between two parties, where one party acts as a representative for the other one in order to conduct a business transaction.
Wakalah is a fundamental part of Takaful.
The concept of Wakalah applies to all Islamic financial institutions. When it comes to Takaful operators, Wakalah allows them to act as a representative for their participants in order to manage and distribute the pooled money received through contributions.
Under this contract, the Takaful operator is allowed to charge a specific fee for providing services to the participants, subject to the guidelines issued by Bank Negara Malaysia. If an additional fee or monetary commitment is required from either party, the reason for it should be clearly stated in writing, unless it is a legal requirement. Do keep a look out for these types of requirements in the fine print of a Takaful Certificate.
How Wakalah is incorporated into our EZTakaful plans.
Rest assured that EZTakaful follows the original Wakalah insurance model in use in Malaysia. In fact, our plan certificates all state that EZTakaful will manage the participants’ contributions by charging a Gross Wakalah Fee, as approved by the regulatory authorities under the principle of Wakalah, and invests it into a special account called the Accident Risk Investment Account.
Now that you know more about Wakalah, you can feel confident that our EZTakaful plans are Shariah compliant!