Besides conventional car insurance, there is another version of it: takaful car insurance. What is takaful? What is the difference between conventional car insurance and takaful car insurance? Read on to find out.

Anyone old enough to drive and own a vehicle must have heard about the alternative to conventional insurance products, that is the takaful insurance products. Almost all insurance products in Malaysia will have their takaful version, and that includes car insurance. But what is the difference compared to conventional insurance?

Fun fact: insurance has existed since 215 BC. Over 1400 years, civilizations throughout the world have been practicing the concept of insurance. In the Arab world, the ancient Arab tribes were the pioneers of takaful. 

The term ‘takaful’ originated from Kafalah. Kafalah is an Arabic word meaning a joint guarantee or guaranteeing each other. A community sharing the responsibilities and fairness in compensation is prominent in takaful concepts. 

Takaful car insurance is Shariah-compliant. Policies are created based on Islamic teachings.

Takaful car insurance is also known as Islamic insurance. It relies on the principles of cooperativeness as well as the separation between the shareholders’ operations and funds. In other words, you, the policyholder, have ownership of your takaful insurance’s operations and funds.

The Muslim jurists made a conclusion that Islamic insurance must be based on the principles mentioned above. In addition to the prominent elements of solidarity, common interest, joint indemnity, and shared responsibility.

In other words, the policyholders are considered to be joint investors. Meanwhile, the takaful operators (insurance vendors) are considered to be a mudarib, which means an agent or manager for the policyholders. Profits and losses are shared. 

Takaful insurance, including takaful car insurance, demands fund contributions where every participant supports one another – sharing is caring. 

Essentially, policyholders under takaful insurance co-operate for the common good of everyone involved. Each policyholder would make a payment (a donation known as tabarru) to help those who require assistance in times of trouble.

Liabilities are spread evenly and losses are divided across the community pooling system. This system has a purpose whereby making profits is not the priority. Instead, it is to encourage and uphold the principle of bearing each other’s burden in troubled times.

Other differences between takaful car insurance and conventional insurance.

There might not be much of a difference between takaful car insurance coverage and conventional insurance. However, there are still some differences in certain aspects; particularly the concepts mentioned previously. Those concepts are the allocation of funds and the sharing of profits.

Just like conventional insurance, takaful policyholders who didn’t make a claim in that particular year are going to enjoy the No Claim Discount (NCD). Here’s the amount that takaful policyholders would receive if they didn’t make any claim:

Coverage Period

NCD Amount

1st year 25%
2nd year 30%
3rd year 38.33%
4th year 45%
5th year 55%

In addition to NCD, you can also look forward to receiving a percentage of the profits shared. That is if you didn’t claim in that particular year. This kind of reward is called hibah (similar to a gift or donation in this case). 

If there’s a sharing surplus when the financial year ends, the distribution of funds will be equal between the insured and insurer. Also, if you’re renewing your takaful car insurance, you can utilize the rebate for your renewal donation. What a way to save! 

Finally, the moment everyone has been waiting for. Is takaful insurance more expensive than the conventional one? The answer is, it simply depends on the coverage type chosen based on the insured’s circumstances. 

Like conventional insurance, the takaful insurance policy would also specify the coverage period and nature of the risk. A takaful operator will administer and manage your funds, normally where a sum of fees may apply (upon agreement of both parties). The fees may include costs for claims management, underwriting, as well as sales and marketing.

Everyone can apply for Takaful insurance.

Although takaful insurance is formed based on Islamic concepts and teachings, it is not limited only to Muslims. Non-Muslims are also eligible to get takaful insurance. Regardless of your faith, you should understand the minor differences and see if you think it is best for you in the long run, even though there’s not much difference when it comes to the premium.

Renew your insurance at and get the best deals!

P/S: It’s school holidays! Before you go cuti-cuti or balik kampung, make sure you have ticked off everything on the car maintenance checklist! Drive safe, maintain social distancing, and take care!




*The content provided is for informational purposes only. FatBerry makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Should you require more information on our products, please refer to or contact us.

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