Protecting against risk
Insurance is a way to protect your money against loss. You pay a small amount regularly, called a premium. If something bad happens, the company pays to help you.
Key idea
Yearly premium = monthly premium × 12. Insurance and takaful reduce financial risk by sharing it among many people.
A worked example
Worked example
A family pays a takaful contribution of RM25 each month.
In one year they pay RM25 × 12 = RM300.
If a member has a loss, money from the shared fund helps to pay for it.
What is takaful?
Takaful is based on mutual help. Members put money into a common fund and agree to help anyone who suffers a loss. When you claim, the fund pays out. This spreads the cost of a problem across many people, so no single family has to pay a very large amount alone. A claim is the money paid out when a covered loss happens, such as a car accident or an illness. Both insurance and takaful give us peace of mind.
Remember
- Premium or contribution = regular payment.
- A claim is money paid out after a loss.
- Takaful means helping each other.