Insurance provided by Principle is based upon the Islamic finance principle of Takaful.
This form of insurance combines mutual participation and an ethical investment policy, whilst not compromising on the protection that conventional insurance offers. These features make this form of insurance and attractive proposition to both non-Muslim and Muslim consumers.

All participants (policyholders) agree to guarantee each other and, instead of paying premiums, they make contributions to a mutual fund, or pool. The pool of collected contributions creates the Takaful fund.

The amount of contribution that each participant makes is based on the type of cover they require, and on their personal circumstances. As in conventional insurance, the policy (Takaful Contract) specifies the nature of the risk and period of cover.

A Wakala fee is payable by all participants. The Wakala fee is the proportion of the total contribution that each member of the Takaful fund pays which goes to cover the administration and operating costs of the Takaful Operator (in this case Principle Insurance), who manages and administers the pool on behalf of participants. These expenses include the costs of sales and marketing, underwriting, and claims management.

Any claims made by participants are paid out of the Takaful fund and any surpluses belong to the participants in the fund.

Each year, an independent firm of professional actuaries will carry out a valuation of the Takaful Fund. This valuation will assess the Takaful Contributions paid into the Takaful Fund, the amount of valid claims paid, the likely cost of any future claims, plus any other future commitments and liabilities, to determine if the Takaful fund is under or over funded.

Where the Takaful fund is over funded, the participants will receive a Participation Discount. The amount of the Participation Discount is expected to vary from year to year and in some years there may be no discount.

The Participation Discount is released to the Takaful Participants on the anniversary of their cover as a reduction against next year’s Takaful Contribution, and shared equally in proportion to their individual Takaful Contributions paid in the prior year. If the Takaful Fund is assessed to be under-funded, Principle Insurance, not the participants, will arrange the advance of funds to cover any deficit. There will be an entitlement to recover any such deficit from future fund surpluses, before any future Participation Discount is given to the Takaful Participants.

To find out more about Takaful (Islamic) insurance and/or to buy cover, visit our Salaam Halal insurance website www.salaaminsurance.com.

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