Before discussing hibah takaful, I will explain to you the meaning of Hibah and Takaful. Hibah and takaful are two different things but they can work together.
What is the Meaning of Hibah & Takaful?
Takaful is a concept where takaful policyholders collectively make monthly contributions into a fund. The accumulated money is then invested in SHARIAH-COMPLIANT stock markets so it can grow and benefit takaful policyholders in the future.
When a takaful policyholder is struck by misfortune such as hospitalization due to critical illness, disability or permanent disability, or other matters agreed upon with the takaful company, the takaful company will pay compensation to the policyholder to cover hospital bills and other expenses.
Additionally, when the takaful policyholder dies, compensation will be paid to the policyholder’s beneficiaries.
Hibah means direct property giving made by the hibah giver while still alive to their heirs as a sign of love. In Malaysia, the applicable concept is conditional hibah (Al-Ruqba), where the hibah agreement is made while the hibah giver is still alive. The implementation of hibah benefits (giving property to heirs) is only done when the hibah giver passes away.
So, What is Hibah Takaful?
Hibah takaful means when a takaful policyholder dies, the distribution of compensation money from the takaful company to the policyholder’s beneficiaries will be done through hibah, meaning directly. Hibah has many advantages compared to other processes like wills.
Advantages:
- Takaful compensation will be received by heirs within 7-30 days (faster than inheritance process which takes 3-20 months)
- Distribution of takaful money is not done according to faraid, but directly based on hibah contract
- Money received by heirs can be used for daily expenses so they can continue life as usual
Although the advantages of hibah takaful provide many benefits to the policyholders themselves, hibah takaful also has its own disadvantages.
Disadvantages:
- Compensation money received by heirs can be depleted quickly
- Heirs might not pay the policyholder’s debts when receiving the compensation
- If the hibah recipient is under 18, the compensation money cannot be withdrawn or will be given to property guardian
- For permanent disability cases, compensation will be paid directly to the policyholder. If the disability prevents them from managing the money, how will they use it for daily needs?
To overcome these shortcomings, most takaful companies have introduced a takaful compensation money management plan called Takaful Trust.
What is Takaful Trust?
Takaful trust is a takaful compensation money management plan where:
- You take a hibah takaful policy as usual, but the nominee is a trustee company
- You can give advance instructions to the trustee company on how your takaful compensation will be distributed when you pass away
- Similarly for permanent disability cases, you can give instructions to the trustee company about managing your takaful compensation distribution
- The trustee company acts like your personal assistant, doing what you instruct with your hibah takaful money
Takaful trust is only eligible for policyholders with takaful policies of RM 500,000 and above. The cost to subscribe to takaful trust is around RM 1500 – RM 3000 depending on your policy amount. Additionally, there is a management charge of around 0.5% to 1% per year after the takaful compensation is received by the trustee company.
Advantages of Takaful Trust:
- Your interests won’t be lost. If your trustee company closes, your interests will be absorbed by a new trustee company
- Takaful money won’t be depleted quickly. Trustee will manage and control money distribution to policyholder’s heirs
- For permanent disability cases, there won’t be misuse of takaful money by beneficiaries
- Policyholder can ensure existing debts (house, car, etc.) are settled first before money is distributed to heirs
- If you distribute your takaful money for religious purposes (contributions to tahfiz, mosques, etc.), this will continue up to a maximum period of 80 years!
