What Exactly is Hibah Takaful in Malaysia?

Hibah is an Islamic principle meaning gifting, blessing, or granting asset ownership from a settler to a named beneficiary (heir or non-heir, Muslim or non-muslim) without making a trade. Moreover, it is a voluntary action out of love rather than seeking glory.

On the other hand, takaful is an Islamic principle based on solidarity and cooperation in that members contribute funds into a pool system to spread risk and indemnify each other. It facilitates asset and life protection and risk compensation. 

Therefore, hibah takaful is a financial product that combines hibah and takaful principles. Including takaful benefits in a hibah policy excludes them from other assets in an estate, allowing beneficiaries to spend the cash value in the takaful plan as they please. So, hibah takaful is a gift from a parent to their descendants or loved ones, giving them a financial leg-up in case of eventualities like an untimely death and permanent disability.

The Beauty/ purpose of Hibah

As highlighted above, hibah takaful is a crucial financial planning instrument in Malaysia. Financial planning ensures that loved ones and heirs receive the funds and other resources necessary to maintain their quality of life upon the breadwinner’s passing. 

Moreover, hibah is readily accessible among Malaysian takaful providers. For example, Takaful MyClick offers the service online so you can download the form, submit it, and become a hibah takaful participant. 

Takaful Malaysia offers multiple takaful products, including Takaful MyClick Term. It offers a coverage duration of up to 80 years in exchange for low contributions. Its products offer a safety net for ambitious Malaysians about offering their  loved ones a brighter and more financially secure future.

• Steady Income Stream
  Income loss due to death or disability, even in a two-income household, upsets the monthly budget. The impact is more significant for families lacking financial planning instruments. Fortunately, a hibah takaful plan can function as a safety net during such instances, allowing families to maintain their financial stability while seeking alternative income sources.

  
  

• Straightforward And Fast Claim Process
  A hibah takaful claim process is clearly stipulated in the contract, and beneficiaries can cash in on the benefits within a month. Therefore, beneficiaries need not worry about whether to appoint a lawyer or spend money on legal fees.




• Securing Your Children’s Future Via Education
  Seasonal expenses like tuition fees can drain the surviving spouse’s resources. However, funds from the hibah takaful plan can cater to such expenses, guaranteeing a good quality of life. 
  Children can access their parents’ takaful plans when they turn 18 and use the proceeds to cover their higher education costs.

Nomination And Beneficiaries

Who Is A Beneficiary?

A beneficiary is an individual(s) named by a takaful participant through a conditional hibah as the recipient of the proceeds listed on the takaful certificate. They can be non-heirs (not a spouse, child, or parent). The Islamic Financial Services Act 2013 instituted the nominee provision to spare the deceased’s loved ones lengthy probate procedures. 

Who Is A Nominee, And Why Is It Necessary To Have One?

A nominee is an individual the takaful participant appoints as a Wasi or executor to the conditional hibah. They can be any trusted individual, including a named beneficiary, and must distribute the proceeds on the takaful certificate as directed.

A hibah takaful service provider can only release the cash value of the takaful certificate to a nominee or upon receiving a Grant of Probate. With a named nominee, the process takes as little as two weeks. In contrast,  failing to name a nominee means your family must seek a Grant of Probate from the court, which typically takes several years.

Financial Aspects Of Hibah Takaful

Absolute Recipient, Non-contestable

Naming a beneficiary(ies) automatically excludes your takaful certificate from estate distribution. Therefore, a conditional hibah beneficiary is an absolute recipient, meaning nobody can challenge their right to the deceased’s takaful benefits. Moreover, a takaful plan is considered a liquid asset, meaning recipients receive the cash value on the takaful certificate within no time. 

Even so, hibah takaful only protects your loved ones if the benefit is substantial and suffices as a secondary income source. Therefore, while fresh grads, just-married females, first jobbers, and just-married males may start with a cheaper hibah takaful contribution, consider increasing contributions as your income increases.

The recommended industry standard of the total hibah takaful benefits should be 5-10 times your annual expenditure.