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Questions and Answers
What is one of the sources of income for the family takaful business?
What is one of the sources of income for the family takaful business?
Which fund is not part of the family takaful funds?
Which fund is not part of the family takaful funds?
Which expense is specifically related to family takaful?
Which expense is specifically related to family takaful?
What type of return is accounted for in the shareholders’ fund?
What type of return is accounted for in the shareholders’ fund?
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Which of the following is accounted in the general takaful expenses?
Which of the following is accounted in the general takaful expenses?
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What principle governs the accounting standards in Takaful?
What principle governs the accounting standards in Takaful?
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Which of the following is not considered an income source for general takaful?
Which of the following is not considered an income source for general takaful?
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What type of fund does the general takaful include?
What type of fund does the general takaful include?
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What is one of the primary purposes of accounting as defined in 1975?
What is one of the primary purposes of accounting as defined in 1975?
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Which of the following activities is NOT part of the accounting process?
Which of the following activities is NOT part of the accounting process?
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According to the content, which of the following stakeholders is NOT specifically mentioned?
According to the content, which of the following stakeholders is NOT specifically mentioned?
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In accounting, what does profitability equate to?
In accounting, what does profitability equate to?
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What type of statement provides insight into an organization’s financial position?
What type of statement provides insight into an organization’s financial position?
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Which concept from Islamic teachings relates to the practice of accounting?
Which concept from Islamic teachings relates to the practice of accounting?
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Which financial statement reflects the flow of cash in and out of a business?
Which financial statement reflects the flow of cash in and out of a business?
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Which component is involved in analyzing financial results?
Which component is involved in analyzing financial results?
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What is the purpose of the Wakalah Fee (WF) in the takaful model?
What is the purpose of the Wakalah Fee (WF) in the takaful model?
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Which portion of the GTF is invested after deducting operating expenses in the mudharabah model?
Which portion of the GTF is invested after deducting operating expenses in the mudharabah model?
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How is the surplus at the end of the year distributed among the takaful operator and participants?
How is the surplus at the end of the year distributed among the takaful operator and participants?
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What is one characteristic of the Fire takaful scheme?
What is one characteristic of the Fire takaful scheme?
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Which type of takaful scheme is NOT listed under Accident/Miscellaneous?
Which type of takaful scheme is NOT listed under Accident/Miscellaneous?
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What is the primary role of the underwriter in General Takaful?
What is the primary role of the underwriter in General Takaful?
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Which of the following is a type of Marine takaful scheme?
Which of the following is a type of Marine takaful scheme?
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What aspect is included in the Wakalah Fee (WF)?
What aspect is included in the Wakalah Fee (WF)?
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What occurs to operating expenses in the mudharabah model?
What occurs to operating expenses in the mudharabah model?
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How might an occupation increase health risks?
How might an occupation increase health risks?
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Which type of information is included in Part 1 of the Underwriting Application?
Which type of information is included in Part 1 of the Underwriting Application?
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What is a significant factor influencing health and longevity according to occupational risks?
What is a significant factor influencing health and longevity according to occupational risks?
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Which of the following is a potential family risk factor noted in the Underwriting Application?
Which of the following is a potential family risk factor noted in the Underwriting Application?
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What might be a consequence of underestimating occupational hazards in an underwriting process?
What might be a consequence of underestimating occupational hazards in an underwriting process?
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Which of the following outlines a specific charge deducted in a Takaful business model?
Which of the following outlines a specific charge deducted in a Takaful business model?
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Which aspect is NOT part of the Underwriting Application's Part 2?
Which aspect is NOT part of the Underwriting Application's Part 2?
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What is the main purpose of the General Takaful Fund?
What is the main purpose of the General Takaful Fund?
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What is the primary reason for requiring witnesses in a commercial contract?
What is the primary reason for requiring witnesses in a commercial contract?
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According to the discussed principles, what should be done if the party liable is mentally deficient?
According to the discussed principles, what should be done if the party liable is mentally deficient?
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What is the primary purpose of documenting contracts in writing according to the content?
What is the primary purpose of documenting contracts in writing according to the content?
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What does the concept of 'proper accounting' ensure in financial transactions?
What does the concept of 'proper accounting' ensure in financial transactions?
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Which of the following is NOT a characteristic of the financial transactions discussed?
Which of the following is NOT a characteristic of the financial transactions discussed?
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In what way should Takaful contributions be treated in financial statements?
In what way should Takaful contributions be treated in financial statements?
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What principle underlies the requirement for witnesses in the context provided?
What principle underlies the requirement for witnesses in the context provided?
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What does 'provision for claims reserve' require according to the content?
What does 'provision for claims reserve' require according to the content?
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What is the primary objective of a Family Takaful plan?
What is the primary objective of a Family Takaful plan?
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How are contributions to the Family Takaful plan made?
How are contributions to the Family Takaful plan made?
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What accounts are created from the contributions in a Family Takaful plan?
What accounts are created from the contributions in a Family Takaful plan?
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What benefit does a participant receive upon maturity of the Family Takaful plan?
What benefit does a participant receive upon maturity of the Family Takaful plan?
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What happens in the event of the death of a participant in a Family Takaful plan?
What happens in the event of the death of a participant in a Family Takaful plan?
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What is the main purpose of underwriting in the Family Takaful plan?
What is the main purpose of underwriting in the Family Takaful plan?
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Which of the following defines 'surrender benefits' in a Family Takaful plan?
Which of the following defines 'surrender benefits' in a Family Takaful plan?
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How are the profits from the investments managed in a Family Takaful plan?
How are the profits from the investments managed in a Family Takaful plan?
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Study Notes
Takaful Operational Mechanisms
- Takaful is a system of Islamic insurance.
- The underlying concepts of Takaful include:
- Takaful: joint guarantee, where a group of participants agree to jointly guarantee each other against a defined loss.
- Tabarru: donation, gift, or contribution, where participants contribute to a fund to assist those facing difficulties.
- Mudharabah/wakalah: profit-sharing or agency arrangements between participants and the operator.
Takaful Industry in Malaysia
- The Malaysian takaful industry began in the early 1980s to address Muslim public needs for Sharia-compliant insurance.
- The Malaysian National Fatwa Committee deemed life insurance void due to the elements of Gharar (uncertainty), Riba' (usury), and Maisir (gambling).
- In 1982, a Special Task Force was formed to assess the viability of an Islamic insurance company.
- The Takaful Act was enacted in 1984, and the first takaful operator was incorporated in 1984.
Takaful Operations in Malaysia
- Participants contribute to a common fund to help each other manage losses.
- A takaful operator manages the fund commercially for profit.
- Sources of operator income include profit from investment of participants' funds, agency/wakalah fees, a share of takaful fund investment profits, and fund surpluses.
Comparison between Takaful and Insurance
- Takaful is a combination of donation and profit-sharing contracts.
- In a Takaful scheme, participants contribute to a fund for mutual assistance.
- Insurance involves an exchange contract where the policyholder pays a premium to the insurer.
- The insurer ensures the policyholder's benefits.
Changes in Malaysian Takaful Industry (1984-2008)
- In 1984, there was one takaful operator with RM10 million in paid-up capital.
- By 2004, there were nine takaful operators with a minimum paid-up capital of RM100 million.
- The products and services offered by operators have expanded.
- The customer base of the industry has broadened, with both Muslim and non-Muslim participation.
- Takaful operators have developed more sophisticated products.
Concept and Operational System of Takaful
- Muslim jurists accept that Takaful should adhere to principles of mutuality and cooperation.
- Types of takaful business include Family Takaful Business and General Takaful Business.
- Underwriting ensures equity among participants and assesses risks for an appropriate contribution system.
Concept and Operational System (Continued)
- Participants who experience undue strain on the fund may need to increase contributions.
- Marketing for Takaful includes various methods like branches, marketing officers, and strategic alliances.
- Takaful income sources are investments, wakalah fees, and fund surpluses.
Concept and Operational System Diagram
- The diagram outlines the flow of contributions and expenses, including participant contributions, and operating expenses, investment profits, and claims.
Family Takaful Plan
- Family Takaful offers coverage and security for dependents, contingency saving, and financial preparation for total permanent disabilities.
- Participants contribute through salary deductions, bank transfers, and other methods.
- Contributions are divided into Participant's Account and Participants Risk Account.
- Investment returns are shared based on pre-agreed ratios between participants and operators.
- Benefits are available for death, maturity, and surrender.
- Underwriting considers age, gender, medical history, and family history to assess risks.
- Financial status and occupation can also affect underwriting.
Family Takaful (Continued)
- Underwriting of Takaful involves evaluating proposer's participation to determine whether to accept coverage and the terms.
- The undertaking must comply with rate adequacy, and be able to cover current and future benefits promised plus related expenses.
- The principle of equity dictates proportionate contributions to risks.
General Takaful Business
- Participants contribute to a general takaful fund.
- Contributions are divided into Wakalah Fee (WF).
- An allocation ratio is based on pre-agreed factors and products.
- Surpluses are distributed per the pre-agreed ratio.
- Operators use WF and investment profits to cover operating expenses.
- Takaful offers various schemes: fire, homeowners, industrial, motor, accident, marine and engineering.
General Takaful (Continued)
- Takaful principles include the participant's interests; the inherent right of the participant to the subject matter of the coverage, their rights in their financial relationships to the subject matter.
- Utmost Good Faith means a positive duty to disclose all relevant facts.
- Indemnity ensures that a participant's financial position after a loss is the same as before the loss.
- Operations of Subrogation and Contribution are detailed.
Accounting Concepts in Takaful
- Accounting in Takaful follows the process of identifying, measuring, and communicating economic information.
- Takaful accounting encompasses contributions, technical reserves (which are based on unused policy coverage periods). The provision for claims is essential to ensure sufficient funds before distributing profits and is necessary due to potential delays in claim approvals.
- Family takaful contributions accrue monthly and treated as fund and profit distributions are based on eligibility.
- Income is recognized based on approved accounting standards, and expenses are handled in operating budgets per Sharia requirements. General Takaful accounts similarly track contributions and expenses.
- Shareholders’ funds receive investment returns and operating expenses are categorized.
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Description
Explore the foundational concepts of Takaful, an Islamic insurance system, and its mechanisms such as joint guarantee and profit-sharing. Learn about the development of the Takaful industry in Malaysia, including the legislative background and the role of the National Fatwa Committee in shaping the industry. This quiz provides insights into the growth and principles of Sharia-compliant insurance.
