Everything You Need to Know About Hibah Takaful, from a Non-Agent

Heard about Hibah Takaful and how useful it is for yourself and your family, but not sure what it is and where to get it? You’ve come to the right place.

No guilt-tripping or sad stories about husbands not doing hibah for their wife and children here, I promise. I’m not an agent – you do or don’t do, up to you.

Let’s start 🙂

Part 1: Hibah Takaful Meaning

Hibah Takaful is the combination of two words: Hibah meaning gift and Takaful meaning the co-operative system of reimbursement or repayment in case of loss, as per Islamic or Syariah guidelines.

It’s not quite the same, but the closest equivalent of Hibah Takaful to conventional insurance is probably Life Insurance. I’ve seen some people refer to it as Takaful Life Insurance or Life Takaful as well.

Part 2: 4 Scenarios where Hibah Takaful is Useful

Rather than telling you what is included in a Hibah Takaful plan, I’m going to tell you in what situation the product is handy to have. The way I see it, Hibah Takaful is useful for four main scenarios:

• Scenario 1 – Pay off debt after your passing
• Scenario 2 – Generational Wealth
• Scenario 3 – Make significant donation
• Scenario 4 – Estate planning

Let’s start one by one with,

Scenario 1 – Pay off debt after your passing

Once a Muslim dies, her/his wealth will be frozen then distributed in this exact order:

1. Pay burial costs
2. Pay outstanding debts (house, credit card, loans, to other people etc)
3. Surviving spouse gets harta sepencarian (many people don’t know this)
4. (If estate-planning documents are in place) distribute according to wishes
5. (if no estate-planning documents) remaining wealth distributed according to faraid

Now let’s say one passes away with RM500k in wealth but have outstanding debts worth RM500k. That means the wealth distribution ends at #2, because the RM500k will be used to pay off the debt. Surviving members of the family gets nothing.

SO. It’s not a bad idea to get Hibah Takaful worth at least the outstanding debt amount so that it could be used to pay off one’s debt after passing. The rest of one’s wealth then can be distributed to loved ones.

Scenario 2 – Generational Wealth

It’s morbid to think about it, but with your death, you can change the course of life for your whole descendants.

How so? Well with Hibah Takaful, you can leave behind generational wealth even if you don’t have a lot of money/assets. Imagine with RM50 or so a month, you can leave behind hundreds of thousands of ringgit?? If you do it right, the cost of your children’s education will be secured.

(This is just my opinion, but I don’t really care about the spouse. He or she is an adult, they can find work and survive somehow. But the children… they deserve all the opportunities you can give them.)

Scenario 3 – Make significant donation

What if you don’t have children?

You can give away that amount as a significant donation or gift to your favourite charity, cause or person(s) upon your passing.

Same as Scenario 2, a small monthly sum can result in six-figure disbursements.

Scenario 4 – Estate planning

If you ask me what is Hibah Takaful’s main advantage, then it has to be this: the gift money will be given directly to the person you want to give to without going through the Islamic Inheritance law system (and lengthy estate planning processes).

Basically, if you took RM250k, then the whole RM250k will be given to the exact person(s) you want. This is especially handy if,

• If you have irresponsible male family members and want to ensure female relatives will be taken cared of
• If you’re a Muslim convert but still want to leave behind money to non-convert family members
• If you have adopted children, who under faraid is NOT eligible to receive inheritance

Then DEFINITELY consider this financial tool.

Further reading: How I Use Faraid Calculator to Decide Who Gets My Money After I’m Gone

Extra ‘bonuses’

This depends on the provider, but some Takaful companies in Malaysia offers Hibah Takaful products which include total and permanent disability. Let’s say you got into an accident and your spine broken. Obviously, you can’t work anymore. It’s handy to have some money then, wouldn’t you agree?

Some may also include ‘bonus’ like Badal Hajj – funds allocated to hire someone to do hajj on your behalf, after your passing. I thought that was a nice touch.

So far, everything sounds great right? It sounds like a miracle product, it covers everything! Wait wait. You should also learn what it is NOT.

Part 3: What is Hibah Takaful, and What it is Not:

#1 – Hibah Takaful is NOT the same with Hibah Harta

There are a few types of Hibah. For the purposes of this article, let’s clarify the difference between Hibah Takaful and Hibah Harta:

• Hibah Takaful = the gift money is disbursed only upon death (or total & permanent disability; the terms vary – check with providers)
• Hibah Harta = gifting assets you already own, such as property, car, money in bank accounts, etc.

#2 – Hibah Takaful is also NOT a Takaful Medical Card

If Hibah Takaful is the Syariah-compliant version of Life Insurance; then Takaful Medical Card is the Syariah-compliant version of (conventional) Medical Card. They may function the same way, but they are technically different products.

Btw, you should totally get Takaful Medical Card too in addition to Hibah Takaful if you can afford it. It is useful to cover hospitalisation costs. The Takaful Provider might allow it as a separate or add-on to your plan.

Related: How to Buy Your Own Damn Insurance/Takaful course.

Part 4: How much Hibah Takaful should you get

So, how much Hibah Takaful should you get? There’s no set rules, nor hibah calculator, but can use this as a guideline:

• Amount to cover your debts, PLUS
• Amount to leave behind to loved ones (5x to 10x annual expense is what they always say)

So let’s say you have RM100k in debt, and your family’s annual expense is RM80k per year. You should get:

• RM100k to pay off the debt, PLUS
• Between RM400k to RM800k for your family
• So ideally, get between RM500k-RM900k in Hibah Takaful

Your next question may be what’s the price to get that amount?

Your Hibah Takaful quotation depends on a few factors: investment-linked or term, your age, gender, smoking status, etc. But assuming you’re in your 20s-30s, a non-smoker and got term insurance, it could be as low as under RM100 per month.

(It could also be as high as hundreds, even four-figures per month if you’re on the older side, a smoker, and got investment-linked with various add-ons)

Part 5: How to Get the Best Hibah Takaful in Malaysia for YOU

You can get Hibah Takaful through a Takaful Agent, from EPF i-Lindung (see #2), or simply buy online (most affordable option and my personal preference).

Which option to take? Well if you know a trusted Takaful agent, can get from them. You can find some contacts in the comments section.

Learn how to buy takaful

If you’ve heard one too many horror stories and want to learn about insurance/takaful first before meeting agent/purchasing your own, take my How to Buy Your Own Damn Insurance/Takaful course.

In the webinar, you will learn how to purchase the best protection that’s within your budget in 2 hours. Save you time.

Fact is, there is a LOT of context to protection products, including Hibah Takaful. The 2-hour course will help you understand what you need to know about protection products from consumer POV.

And there you have it. If you know of other options to get Hibah Takaful, especially Takaful online options, please share the info in the comments section so the rest of us can learn!