Islamic death cover relies on family takaful. Each participant pays a tabarru' contribution into a common fund that pays a lump sum to the beneficiaries on death, without interest and with investments that comply with sharia principles.
What a takaful death benefit pays out
When the participant dies, the risk fund pays a lump sum to the named beneficiaries. This sum is not a speculative gain: according to the State Life takaful FAQ, takaful covers only pure risk, which answers the objection of maysir, or gambling.
The donation contract at the heart of family takaful
Critics regard conventional life insurance as an exchange contract carrying excessive gharar. Takaful replaces it with a tabarru' contract, a donation to the common fund, in which the remaining uncertainty is tolerable. Participants thus help one another in the face of death.
Two separate funds for risk and savings
The IFSB-14 standard distinguishes the risk fund, which pools mortality risk, from the investment fund reserved for family takaful products with a savings element. In this second participants' fund, the investment risk is borne by the participants themselves.
Term cover or a combined plan with savings
Term cover pays a lump sum only if death occurs during the policy period. A combined plan adds savings invested in compliant assets, close to Islamic life insurance; in that case the risk contribution must be kept distinct from the savings payment.
Where contributions go: sukuk and screened equities
Takaful operators invest in real estate, Islamic banks, compliant equities and approved securities such as sukuk. Companies earning their revenue from alcohol, tobacco, weapons or pornography are excluded from the investments backing death cover, so participants know where their contributions are placed.
Salam, the first takaful life policy in France
The first takaful life policy sold in France, named Salam, was launched by Swiss Life in autumn 2013. Vitis Life, a Luxembourg insurer, followed with Amane Exclusive Life, a high-end product requiring a minimum premium of 250,000 euros from each subscriber.
Sakina, a death benefit geared towards funerals
In March 2020 the Marseille broker SAAFI announced Sakina, presented as the first takaful death, funeral and repatriation offer in France, with sums assured from 2,000 to 7,000 euros. The underwriting insurer is not named, and the offer's current activity remains unconfirmed.
A French framework with no specific takaful rules
The ACPR, which supervises 660 insurance organisations, has published no specific position on takaful: offers fall under the Insurance Code and Solvency II. The French takaful market is therefore limited to a handful of policies distributed by mainstream providers.
Malaysia, the benchmark market for family takaful
In Malaysia, takaful is governed by the Islamic Financial Services Act 2013, licensed by Bank Negara Malaysia, and open to everyone regardless of religion. The Zurich group launched its Family Takaful in 2009 through a joint venture in Dubai's DIFC.
What happens to the death fund surplus
Fewer deaths than expected produce a surplus. A death fund run on a wakala basis leaves all of it to the participants, while under mudaraba the shareholders receive a share. In Pakistan, it is split pro rata to contributions, after deducting claims already received.
Death cover and murabaha financing
A bank financing a home through murabaha generally requires borrower insurance or an equivalent guarantee. In France, no dedicated takaful borrower insurance has been identified, so the borrower must review the conventional death cover on offer and discuss it with the lender.
Drafting the beneficiary clause with care
The beneficiary clause determines who receives the death benefit. It may be drafted with Islamic inheritance rules in mind, but it must remain valid under the law of the country of residence; local legal advice and the sharia committee's opinion help reconcile both.
Taking out takaful death cover step by step
- Check with the national regulator, such as the ACPR in France or BNM in Malaysia, that the operator is properly licensed.
- Ask for the sharia committee's fatwa and the model applied to the death fund: wakala, mudaraba or wakala-waqf.
- Separate, in the quote, the death risk contribution, the wakala fee and any savings payment.
- Read the exclusions, the cover period, the maximum entry age and the health declaration requirements.
- Draft the beneficiary clause taking into account inheritance rules and the applicable local law.
- Tell the beneficiaries that the policy exists and which documents they will need to provide on death.
What makes up the death cover contribution
| Item | Function | Factors that vary it |
|---|---|---|
| Risk tabarru' | Feeds the fund that pays death benefits | Age, health, amount of the sum assured |
| Wakala fee | Pays the managing operator | Contract model and the operator's pricing policy |
| Savings payment | Builds savings invested in compliant assets | Amount chosen, performance of sukuk and screened equities |
| Mudaraba share | Splits returns between operator and participants | Contractual profit-sharing ratio |
| Surplus | May be refunded or reduce future contributions | Death claims experience for the year |
Documents to join and to claim the death benefit
- Participant's identity document and proof of address
- Medical questionnaire when the sum assured or age requires it
- Written nomination of beneficiaries
- Murabaha or ijara financing agreement if the cover protects a loan
- Death certificate and medical certificate stating the cause
- Beneficiaries' identity documents and bank details
Pitfalls of so-called Islamic death cover
- Relying on a halal label on a death policy with no identified sharia committee and no fatwa given to the subscriber.
- Confusing a conventional funeral plan adapted to Muslim rites with a genuine takaful fund managed on behalf of participants.
- Forgetting that the savings part of a combined plan places the investment risk on the participant, as described in IFSB-14.
- Trusting a surplus distribution promised verbally, when only the written fund rules bind the operator.
- Neglecting the beneficiary clause, which can send the benefit to unintended people or delay payment.
Takaful death cover: your questions
Is takaful death cover available in France?
Offers are rare. Swiss Life launched Salam in 2013, and SAAFI announced Sakina in 2020 for death, funeral and repatriation cover, with no confirmation of its current activity. Each offer should be checked with the distributor and with the ACPR.
Is a takaful death benefit compatible with the ban on maysir?
According to the State Life takaful FAQ, takaful covers only pure risk and compensation is limited to the loss suffered, which answers the gambling objection. How a specific policy is assessed should still be confirmed with the operator's sharia committee.
Do you have to be Muslim to take out takaful death cover?
No, at least in Malaysia: the Islamic Financial Services Act 2013 opens takaful to everyone, whatever their religion. Elsewhere, eligibility depends on the operator, such as the French tax residence required for the Sakina offer.
What happens to the money if no participant dies?
Unused contributions form a surplus. Depending on the model, it is returned to participants, used to reduce future contributions or shared with the operator under mudaraba. The exact rules are set out in the policy and the fund's articles.