Abstract:

Section 2 of Islamic Financial and Services Act 2013 (IFSA) Malaysia Act, defines ‘Takaful’ (Islamic insurance), as an arrangement based on mutual assistance under which takaful participants agree to contribute to a common fund providing for mutual financial benefits payable to all the takaful participants or their beneficiaries on the occurrence of pre-agreed events. Before the coming of takaful, the Muslims had no option but to engage with the settled Conventional Insurance, which is seen to be un-islamic as it involves the prohibited elements in Islam. The introduction of the new concept in replace to the existing insurance has given a better option to Muslims where they can get the financial protection which is in line with the religion. In takaful contract, one of the essential elements to be deeply understood is the state of intention of the participants as well as the understanding on the arrangement before the contract is to be concluded. However, it is debatable as to whether the clients have fully understood the so-called islamic concept of insurance prior to their acceptance. This paper is intended to discuss the issue and to suggest the recommendations in curbing the problem.