Singaporean Muslims’ Insurance Guide

“Should I surrender my current non-shariah-compliant insurance plans? But if I were to surrender, I’ll be at a loss.”, “Why is there no takaful in Singapore?”, “Do you think the hukum is Wajib for a sole breadwinner to purchase insurance?”. 

These are just some of the questions we receive at Islamic Finance Singapore (IFSG). Do note that we are not financial advisors. If the question comes above our expertise, we pass on these questions to the professionals in our network.

Still, an independent party’s guide on insurance in Singapore for Muslims is why this article is written.

Before that, do join our telegram group for the latest on Islamic finance and investment here!

What is insurance?

Insurance is a contract where the insurance company (insurer) agrees to compensate you, the policyholder, in the event of death, total permanent disability, critical illness or other events such as a house fire. It is a novel concept and forms one of the five essential pillars of wealth management under wealth protection. 

The original concept is simple: you and other policyholders pay an amount, whether monthly or annually (called a premium), to the insurer, which then pools it. In case of an event, say, a house fire, the insurer will take a portion of the pooled and invested money to compensate the policyholder so that they can pay for the house restoration. The chance of every policyholder claiming at one time is slim. Insurance companies have data and complex models to ensure that the policyholder’s premium commensurate with the likelihood of the insured event happening. That is why some insurance premiums may be lower for young and non-smoking individuals than those with a family history of cancer. 

Insurance is a contract between an individual or entity and an insurance company that provides financial protection or reimbursement against losses. In the context of Singaporean Muslims, insurance is important as it helps protect their financial stability in the event of unforeseen circumstances. For example, life insurance can provide financial support to the family of a deceased Muslim, while takaful insurance can provide protection against unexpected medical bills or loss of income due to disability. Other common insurance policies available in Singapore include car insurance, home insurance, and travel insurance. These policies can benefit the Muslim community by offering protection and peace of mind, allowing them to focus on their spiritual and personal growth without worrying about financial setbacks. It is important for individuals to assess their protection needs and strike a balance between coverage and affordability when choosing insurance policies.

Who is it for?

Insurance is for anyone and everyone. You can purchase it for your children or even as a student in a tertiary institution. Despite this, it is highly advisable to do it while you are younger and healthier, as insurance premiums will be much lower.

Why is having insurance a need?

Calamities can occur to anyone at any time, one day, you are fine, and the next day, something could happen. For example, Anita, a housewife, lost her husband to an accident and had three young children. If she were to rely on investments from her late husband, it would only have been sufficient to cover the regular monthly expenses for a few months. But with insurance, the proceeds left Anita with enough money to get back on her feet and get a job to sustain herself and her three children.

While building your wealth, you must also ensure it does not go away instantly by considering income protection should a calamity occur.

Is insurance halal?

Firstly, insurance, as shown above, could be a lifesaver. The concept of risk management in Islam is encouraged, evidenced by the Quran and Sunnah. Unfortunately, due to the buy and sell contracts involved in insurance policies, where an insurer exchanges the indemnity of an individual for payment of a premium for an event, it requires scrutiny of whether the contract involves interest (riba), deception (gharar) and zero-sum game (maysir) applies. 

While we will touch on the Islamic version of insurance (Takaful) soon, explaining these three elements’ meanings and how they apply to present-day insurance policies is best.

I. Interest (riba): This arises in the unequal exchange of money. Although you might probably have heard of its existence in loans from banks, its application comes twofold in insurance. The first form of interest arising in insurance contracts comes from the investments made by the insurance company using the premiums you have paid. Sure, there is insurance cost, but the invested portion will be invested in non-halal or Shariah non-compliant investments such as interest-bearing securities, i.e. conventional bonds and conventional money market instruments. The returns are then passed on to you as dividends or added back to your cash value. This also goes for those “Muslim-friendly” investments that some Muslim and non-Muslim financial advisors recommend to their clients (we argue on this here). The second form of interest occurs when there are differences of exchanges between the premiums and claims paid, and it happens on a deferred basis [2]. Some Shariah scholars view [3] insurance contracts as a transaction where money is being exchanged for money, as two parties to the contract are basically exchanging the premiums for claims, both in monetary terms [4]. For instance, when you pay a monthly premium of $30 or $1,200 annually, in the event the insured event occurs, say a house fire or Total Permanent Disability (TPD), the insurer will have to pay you the sum assured, which is more than what you have been paying monthly or annually. Thus, the interest arises from the difference in the amount you have been paying against the sum assured disbursed to you. 

The Quran and sunnah abound with appeals to the prohibition of interest. The most obvious is mentioned in Surah al-Baqarah verse 186, where Allah and His Messenger wage war on those who consume interest. The Prophet ﷺ also mentioned that consuming interest is second to shirk or idolatry. As Muslims, we need to be aware of interest in its various manifestations.

II. Excess or unacceptable ambiguity (gharar): While gharar is loosely translated as uncertainty, the real meaning can be appreciated in its application; for example, if a buyer sells a calf that is not born, it is considered gharar as even the seller does not know if the calf will be born alive. In insurance, gharar arises on whether the insured event will happen. Even with so much data and complex actuarial models, no insurer nor policyholder can predict whether the insured event will occur. In contrast, the insurer might also face gharar as a policyholder may have only paid a year’s premium, but due to a claim arising from the insured event, the insurer has to pay the sum assured, which could be 100x the premium.

III. Gambling (maysir): Maysir is a game of chance for money and it stems from the notion that, should certain events occur, the insured could profit significantly (i.e. gain) from the insurance coverage. Conventional insurance usually allows both insurer and insured to make excessive speculation which is regarded as basing its fortune on good or bad luck of others; therefore, it falls under the definition of gambling (maysir). Despite the more straightforward translation would be gambling, as shown in several Islamic finance books, some Shariah scholars [5] used the term ‘zero-sum game’ to show that one side will permanently lose no matter what. In insurance, maysir arises because of either the policyholder or the insurer “winning”. If the insured event occurs, resulting in a claim by the policyholder, the policyholder “wins”. In contrast, if the insured event does not happen, the insurer “wins”. 

In essence, it is not that Islam is demanding or unjustified; instead, it is a divine rule that Muslims have to follow. The three elements arise from the type of contract used: a buy & sell contract in insurance policies. We will soon see how the Islamic version of insurance evades these elements.

What is the difference between an independent financial advisory firm and a tied financial advisor? 

This is brought up as it is a common question in financial groups, and only a few in public do know the difference. To start, an associated financial advisor (AFA) is tagged to your usual insurance companies, namely: AIA, AXA, NTUC Income, Prudential, Manulife etc. While a financial advisor may claim to be from a specific group with a different name, checking the app they are using will usually reveal which insurance company their group is under. On the other hand, an independent financial advisor (IFA) is not associated with one insurance company and can offer you products from different insurance companies. 

There are other differences between both; one difference is that an IFA can offer more investment products which an AFA would not be able to. For example, an AIA insurance advisor may only be limited to AIA funds with underlying funds from Franklin Templeton or Blackrock. In contrast, an IFA can offer funds from Franklin Templeton, Blackrock and other fund houses such as Maybank Asset Management and HSBC.

What about an independently owned financial advisory firm?

The regulating body in Singapore, MAS, has set high criteria for firms to call themselves independent, including having no commercial incentive to favour one insurance product over the other. But you still need to be aware of the difference between independent and independently owned financial advisory firms. The latter are actually subsidiaries of an insurance company and can offer different insurance products but will receive higher commissions if they can sell products from the main company. For a good read on this, you can click here.

Examples of independent financial advisory firms include Financial Alliance and Professional Investment Advisory (PIAS).

What are the types of insurance?

Insurance can be divided into three; life, general and health insurance. The former is related to the individual’s life; thus, in the case of death, total permanent disability, compensation will be given to the policyholder. Some insurance products under this type also incorporate savings and investments, as you will see soon.

The second type of insurance, general insurance, is geared towards assets you own, such as a house. So in the case of fire or accident, compensation will be given by the insurance company to the policyholder.

The third type, health insurance, helps you pay for costly medical bills.

For this article, we will only be focusing on the more popular type of insurance, namely:

1. General insurance,
2. Term insurance
3. Endowments
4. Investment-linked policies,
5. Universal life policy

The article will then explain the advantages and disadvantages as well as what makes it non-permissible in the eyes of Shariah. We will then visit the Islamic alternative before looking at the Singapore context.

What is general insurance?

General insurance is a non-life insurance product covering damages and losses. It helps us to protect the things we value the most, such as our homes, our cars and our valuables, from the financial impact of risks, big and small – from fire, flood, storm and earthquake to theft, car accidents, travel, mishaps – and even from the costs of legal action against us. 

General insurance can also cover third-party damages, for instance, in a road accident, the general insurer will pay out to the third-party property or body. Higher-tiered general insurance can also cover the policyholder if there is a bodily injury.

General insurance includes, but is not limited to: 

1. Motor insurance;
2. Home insurance;
3. Health insurance;
4. Fire insurance;
5. Accident insurance;
6. Travel insurance;
7. Theft insurance, etc.

The tangible assets are susceptible to damages, and a need to protect the economic value of the assets is needed. For this purpose, general insurance products are bought to protect against unforeseeable contingencies like damage and loss of the asset.

Your insurance company will pay you the sum assured or an agreed amount to cover some or all the loss under certain situations. For example, loss of your belongings when you travel, damage to your car and house.

Advantages of general insurance

1. Renewable 

General insurance is a short-term contract to be renewed every year. If you think it is no longer necessary, you can terminate the contract (depending on the stipulated terms and conditions).

2. Pick and Choose

You can decide on your own which type of insurance you wish to subscribe to with the exception of private properties where it is a must to have your own insurance. For instance, a person with a vehicle could buy insurance coverage for themselves or just the vehicle or third party or even all.

Disadvantages of general insurance

1. No Return of Premium Plans

General insurance is a contract of indemnity coverage for unexpected losses or sudden liability. Your assets will only get covered if they are claimed during uncertain events. Thus, no part of the premium shall be reimbursed if the claim is not being made.

2. No Cash Value

You cannot draw out the premiums from general insurance as it does not offer cash value. The amount payable is restricted to the liability incurred or actual loss suffered, irrespective of the policy amount.

What are the Shariah issues prevalent in conventional general insurance?

All three prohibited elements exist in general insurance. First, the riba (interest) element where the insurance companies commonly invest the paid premiums of the policyholders mainly into interest-bearing securities and conventional financial assets. Rather than being reimbursed for the loss incurred, the benefit paid to the policyholder is the return of the interest-bearing investments which results from the activities of making money-on-money. Also, the riba (interest) element can be seen when the amount of money received by the policyholder, either on the occurrence of the insured event or upon maturity of the policy, is mostly more than the total premiums he has paid. There is no equality between the instalments paid by the insured party and the compensation paid by the insurance company. What the company pays may be more, less or equal to that paid by the insured, and equality is very unlikely. This scenario constitutes two riba elements: surplus riba (riba al-Fadl) and credit riba (riba al-nasiah).

Second, the gharar (ambiguity) element occurs when the terms of the policies make it difficult for claims to be made e.g.: travel insurance pertaining to flight delays or flight cancellations. Another instance is through the technical definition of gharar which is “when the probability of getting it and not getting are about the same” (ISRA Compendium, Mu’jam ISRA), the application of which occurs when policyholders are paying a premium for an event that may or may not occur in the future.

Third, the maysir (which may include zero-sum game) is when either party, policyholder or insurance company, ‘won’ over one another upon the insured event taking place. For example, suppose there is a calamity. In that case, the policyholders can claim money from the insurance company. In contrast, if there is none, policyholders will get nothing. The result will always be an advantage on one side and a loss for another.

What is term insurance?

Term Insurance is a policy offering death, total permanent disability (TPD) and optional critical illness coverage for a specified term with no cash value. It also offers financial protection for a certain period of years at the most affordable rates. With term insurance, you can get much life cover (i.e. sum assured) at a relatively low premium rate. Suppose the insured dies during the period specified in the policy, and the policy are still active. In that case, a death benefit shall be paid to the nominees of the insured individual. If the term expires and the individual dies afterwards, there would be no coverage or payout.

The simplest to understand term insurance is that it pays out a fixed sum assured to the nominee in case of the insured’s death during the policy term. However, such plans only pay something to the beneficiaries at the end of the policy term enabling them to sustain the same lifestyle or pay off existing liabilities without compromising on their dreams, thanks to the sum assured that they would receive from life insurance.

A basic variant of term insurance has no cash value, which means if the insured person survives the term of the policy, the policy does not return any value, with the exceptions of plans like Return on Premium etc.

Advantages of term insurance

1. Tax Exemption 

You are entitled to tax exemptions on the paid premium (subject to the terms and conditions of tax laws).

2. Cheaper

Term Insurance is considerably less expensive and cheaper than permanent insurance. As a result, it is some of the most affordable life insurance products. 

3. Financial Blanket

Suppose you are the breadwinner and primary earner. In that case, term insurance acts like a financial blanket and income replacement for your family during your absence.

Disadvantages of term insurance

1. Temporary Insured

You will be covered only for a certain period. Once the period ends, you will not be covered anymore.

2. No Cash Value

The cash value component serves as a living benefit for policyholders who may draw funds and utilize them for personal purposes. Unlike most types of permanent insurance, term insurance has no cash value. The only value is the death benefit from the policy, subject to any claims made during the lifetime of the policyholder.

3. No Return of Premium Plans

If you survive till the end of the policy term, you will not get your money back.

What are the Shariah issues prevalent in term insurance?

All three prohibited elements also exist in term insurance:

1. Riba (interest) is when the interest income generated from the interest-based investment activities, as well as when the sum insured is not equivalent to the paid premium.
2. Gharar (deception) is when a lot of policyholders are not aware that the claims may not be as straightforward or when applying the other technical definition, is when the insured event may or may not occur.
3. Maysir (which may include zero-sum game) is when the policyholder shall not get any of the paid premium if they survive upon the maturity of the policy term.

What is endowment insurance?

Endowment insurance is a form of life insurance is a wealth accumulation product that has cash value and where the benefit is based on the premium chosen by the client. Policyholders don’t get the sum assured when the policy matures, rather, they receive the policy value (this is where the guaranteed and non-guaranteed portion comes in). However, in case of death, the sum assured (plus bonus, if any) shall be payable to the nominee (beneficiaries) of the policy. 

Apart from covering the insured’s life, it helps the policyholder save regularly over a specific period so that they can get a lump sum on the policy maturity in case they survive the policy term. This maturity amount can meet various financial needs such as funding one’s retirement, children’s education or marriage or buying a house. Endowment insurance fulfils the dual requirement for a life cover and savings under a single plan. 

Advantages of endowment insurance

1. Tax Exemption 

You are entitled to tax exemptions on the paid premium (subject to the terms and conditions of tax laws).

2. Investment growth

Part of the premiums paid is deposited into investment vehicles, allowing your money to grow over the contract term. As a result, it is appealing if you’re looking for an insurance policy that offers built-in, planned savings.

3. Dual benefits

In case of the demise of the insured, the beneficiary/nominee of the policy gets the sum assured along with bonuses. If they outlive the policy, the insured is allowed to get the sum assured.

Disadvantages of endowment insurance

1. Expensive & High premiums

Endowment insurance tends to be higher than other types of insurance coverage, with a cash value component. Therefore, it is essential to consider whether the benefits justify the cost.

2. Non-renewable or convertible

Endowment policies are designed to last for a specific period only, and these policies are generally not renewable or convertible. So if your policy is for 10 years, you won’t be able to renew it for another 10 years or convert it to another type of insurance such as term or whole life. Thus one should not buy endowment plans to cover for death and TPD.

3. Low returns

Endowment is designed to be low-risk. While the money invested in a life insurance endowment policy earns interest, returns tend to be on the lower side. Depending on your investment style and risk tolerance, you might get a much better return on your money by putting it into the market instead.

What are the Shariah issues prevalent in conventional endowment insurance?

There is an element of riba (interest) that occurs in the endowment policies promising a guaranteed return. Additionally, the premiums paid by the policyholders shall be invested in interest-bearing instruments to grow their cash value.

What are investment-linked policies (ILPs)?

An investment-linked insurance policy is an insurance plan that combines investment and protection. It is a hybrid of risk protection and wealth accumulation, where the paid premiums not only provide you with life insurance coverage but part of the premiums will also be invested in specific investment funds of your choice, depending on your risk appetite. The insurer would have stipulated how much of your premium goes for protection and how much of it goes towards investment, for instance, 70% of the premiums go into insurance protection, and the rest goes into investment funds.

Advantages of investment-linked policies

1. Flexibility

Investment-linked policies allow you to choose your level of protection and investment. You may vary the premium payments or coverage amounts according to your changing financial circumstances. 

2. Choice of Funds and Diversification

This plan also allows you to choose from a wide variety of funds to invest in, managed by professional fund managers, depending on the risk appetite you are comfortable with. In addition, you can move your money from one fund to another to suit your financial situation and risk profile. On top of that, investment-linked policies offer you access to different portfolios to help you to diversify your investments and protect against the risk of “putting too many eggs in one basket”.

3. Potentially Higher Returns

You can earn potentially higher returns over the long term than other life insurance policies, such as traditional whole life and endowment plans, since you will enjoy the full benefit of any growth in the value of the units that have been allocated to you.

Disadvantages of investment-linked policies

1. No Guaranteed Returns

It would be best if you understood that there are only guaranteed returns for some investments. Similar to these investment-linked policies, the performance of the underlying funds will significantly affect your potential returns. If your risk appetite is high, your policies may be exposed to high-risk investment instruments, i.e. equities, for better returns. Higher risks result in higher returns and lower risks lower return.

2. Hefty fees

Your investment returns would depend not only on the performance of the fund but also on the fees you incur. For example, investment returns of 8% would only be 3% if the overall costs are up to 5%. This is due to the several sales costs charged by the insurer, i.e. management fees, trustee fees, sales taxes and, in some cases, withdrawal charges. As a result, the actual premiums placed for the investments portion are only partially used to invest, as some would be used to foot the costs of the said fees.

3. No Cash Values 

There are no guaranteed cash values provided for investment-linked policies. Instead, the policy’s value depends on the price of the underlying units, which in turn depends on how the investments in the fund perform. Fees, expenses and insurance charges for the plan are paid through a deduction of the premium and sale of purchased units.

What are the Shariah issues prevalent in conventional investment-linked policies?

The funds in the investment-linked policies might be invested in interest-bearing instruments if the policyholders didn’t choose or are only offered non-shariah compliant funds.The profits or returns generated from the investment activities will be passed or shared with the policyholders’ funds, increasing the cash value. As the sources of the investment returns are coming from non-halal activities, thus investment-linked policies are non-halal too.

What is a universal life or whole life plan?

Whole life and universal life are two types of life insurance. Both policies provide lifelong coverage with a cash value component. As long as premiums are paid on time, you will be covered for the rest of your life while growing the cash value of the policy since it will be invested. The cash value can then be enjoyed by the insured if he/she decides to surrender the policy and forgo the sum assured, otherwise, the beneficiaries will benefit from the cash value and sum assured upon the demise of the insured.

savings portion that allows you to enjoy its cash value later.

The significant difference between both types is whole life insurance offers consistent premiums and guaranteed cash value accumulation. In contrast, universal life insurance allows flexibility in the premium payments, death benefits and savings portion.

Advantages of universal life or whole life plan

1. Cash Values

Both universal life and whole life insurance plans offer you the savings option. Your policy’s cash value will increase over time, and you can either withdraw the accumulated funds or borrow against it. Furthermore, the money in the cash value account can usually be reinvested to earn more returns and/or interest. Even if you decide to terminate the policy before the maturity date, you will typically be refunded a portion of the cash value up to the amount of premiums paid, minus any charges or fees.

2. Flexibility 

The universal life policy offers flexibility features, where you can adjust your insurance plan according to your financial circumstances and changing needs. For example, you can increase or decrease your premium or even skip payments if your cash value amount can cover the payment for you. 

3. Fixed Premiums and Fixed Death Benefits

The whole life insurance policy gives you fixed premiums and a fixed death benefit. It stays constant for the duration throughout the life of the policyholder as long as the premiums are paid consistently. In other words, due to the fixed features, you do not have to worry about increasing premiums as you age. Your loved ones will also know how much to expect when your life insurance benefit is paid out upon your demise.

Disadvantages of universal life or whole life plan

1. Expensive

Both life insurance policies are pretty expensive than the standard term life insurance. As both plans build cash value over time, the premiums payments are slightly higher and cost you a little more.

2. Complex Product

Both whole life and universal life insurance are complex products with many features and potential benefits. Still, these can be challenging to take full advantage of without a professional.

What are the Shariah issues prevalent in conventional universal life or whole life plans?

Both types of policies have the element of riba (interest). Other than the interest-based investment activities, there is no equality between the instalments paid by the policyholder and the compensation paid by the insurance company. What the company pays may be more, less or equal to that paid by the insured, and equality is very unlikely.

What is Islamic insurance?

The Islamic version of insurance is called Takaful which is the arabic term for mutual cooperation or solidarity and is a derivation of the root word kafala (كفل), meaning to take responsibility of caring for someone.

Takaful is a scheme where the participants regularly contribute to a common fund and intend to guarantee each other jointly. When a person participates in a takaful scheme, he does not only seek protection for himself but also jointly cooperates with other participants to mutually contribute to one another in case of need. It is based on brotherhood and solidarity, providing mutual assistance and financial aid between the participants.

It is not a contract of buying and selling where a party offers and sells protection, and the other party accepts and buys the service at a particular cost or price. Instead, it is an arrangement whereby a group of individuals each pay a sum of money, and compensation for the losses of members of the group is paid out of the total sum. Hence, it manifests a sense of brotherhood and solidarity amongst the participants who are willing to help and assist one another in times of difficulty and need. 

Evidence from the Quran or Sunnah on Takaful/Islamic insurance?

The foundation of Islamic insurance is built based on mutual cooperation and mutual assistance. This has been stated in the Quran – Surah Al-Maidah, verse 2: “…Cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression….”

The essence of Takaful could be seen in the system of mutual help concerning the custom of blood money under the ancient Arab tribal custom, and eventually was approved by the Prophet Muhammad SAW. The basis of shared responsibility in the system of “Aquila”, as practised between Muslims of Mecca (muhajirin) and Medina (Ansar), laid the foundation of mutual insurance. The Prophet’s companions then followed this practice. Aqila is non-commercial and is aimed at helping those in need without demanding contractual payments. Instead, it is motivated by the sense of brotherhood and mutual responsibility to help fellow members of the tribe who need contribution.

Is there a fatwa on insurance for Singaporean Muslims?

There is no specific fatwa issued by the Islamic Religious Council of Singapore (MUIS) pertinent to insurance subscriptions, except for Group Insurance (reference), Irsyad on Careshield Life (reference) and insurance for Haj pilgrims (reference). The Group Insurance fatwa elaborated first and foremost on a decision reached during an Al-Azhar conference in 1965 on mutual and cooperative insurance. It then applied the fatwa on the current context where insurance companies are mostly owned by corporations that seek to profit from the insurance business and thus did not achieve the level of acknowledgement by the attending scholars. 

However, as there is ambiguity in classifying the Group Insurance as cooperative insurance, MUIS resolved the fatwa by allowing the Muslims to make their own choice, depending on their needs and necessity.

There is however a fatwa by Prof.Dr Akram Laldin who was engaged by Financial Alliance Islamic Wealth Advisor (FAiWA) to provide some guidance to their financial advisors when approaching insurance. You may contact us or approach them to learn more.

The proposed method of insurance for Muslims in Singapore

As no Takaful products are available in the Singapore market as of writing, it is advisable and highly encouraged for Singapore Muslims to only subscribe to cooperative insurance products. Commercial insurance is strictly prohibited in Islam due to the prohibited elements.

Further to the above, The Islamic Fiqh Council by the Organization of Islamic Countries (OIC) also has resolved that it is permissible for Muslims who reside in non-muslims countries (including Singapore) to subscribe to or purchase any cooperative insurance in the absence of takaful products. 

Should there be no takaful alternative, then Muslims may be allowed to participate in insurance as coverage for medical situations, death of the breadwinner or total permanent disability. There are also ILPs with Shariah-compliant funds as shared in the section below.

Should insurance be a part of your financial planning?

Yes, of course.

One of the critical areas in wealth management is the protection of wealth or mitigating the risk of loss, which can be done by purchasing an insurance policy or participating in a takaful program in the future.

In Islam, mitigating risk in our life is recommended as based on the hadith: “Anas bin Malik (may Allah be pleased with him) narrated that the Holy Prophet Muhammad SAW told a Bedouin Arab who left his camel untied trusting to the will of Allah Almighty, to tie the camel first then leave it to Allah Almighty” [Sahih Muslim: Hadith No. 59]. 

However, including insurance subscriptions in financial planning depends on your financial circumstances. If your financial status is still unstable and you are struggling to meet the necessities, i.e. food, house, clothing etc., you may delay its inclusion until you have reached financial stability.

How much does insurance cost?

The cost of insurance varies, depending on the insurance types and coverage. Your age, lifestyle and occupation may also influence the price of your insurance plan. According to Pacific Prime, Singapore is ranked as one of the five most expensive countries for individual and family health insurance costing $6,265 (SGD8,978.72) and $17,803 (SGD25,514.46) annually, respectively. Moneyline Singapore suggests the spending expenses for insurance should be between 3% to a maximum of 10% of monthly income, depending on your financial circumstances and your preferred product mix.

Misconceptions by individuals about insurance

1. Insurance only for old people

Insurance is for everyone and anyone, regardless if you are young or old. It is better to purchase insurance when you are younger than when you are older. It will cost you a lot less now than if you were to buy at, let’s say, age 50 or 60. This is because as you are still young and healthy, you are less likely to show and develop health problems soon. On the other hand, an older person will need more money to be protected because of the potential number of health concerns they may face.

2. Medical insurance from the company is enough

Most people like to assume that medical insurance from the workplace is more than enough and there is no further need to subscribe to a personal policy. However, your company’s group insurance is only good as long you are an employee. Remember, getting your policy later could also mean higher premiums. So, start young. Having your medical insurance on top of the one provided by your workplace is always better, as it provides you with an additional net of security.

3. Young people don’t need critical illness insurance.

If you think that “I am young and healthy. I doubt I will get any critical illnesses at my age.”, then you are wrong. Health problems can occur at any age. When an illness strikes and you don’t have proper insurance coverage, the costs of obtaining a policy after that will be significantly higher than they would have been beforehand. You might also not be able to purchase critical illness coverage due to your existing conditions.

Financial Advisors with access to shariah-compliant funds

While there are currently 64 financial advisory firms in Singapore, The Business Times reported in 2019 that Singapore has 20,000 financial advisors. For this reason, the lists below are not exhaustive. Should you wish to feature your financial advisory firm, email us, and we’ll update the list:

In conclusion

While there are other insurance products that are not covered such as riders, critical illness insurance and so on, the four insurance products elaborated on above are the first few insurance products you will be offered or come across. Granted, they are different from the actual takaful we need but rest assured that efforts are underway to bring it to the public.

While the unavailability of halal insurance or takaful persists, Muslims in Singapore may be allowed to participate in insurance based on needs, rather than for luxurious purposes. As we all know, insurance is meant for protection and to bring the insured back to the position where he/she was before the insured event occurs. Thus this should be the main objective, rather that to use insurance for wealth building purposes. 

This is also in line with the Islamic legal maxim, “الضرورات تقدر بقدرها”, which means, Necessity is determined by the extent thereof. Once it does launch, then we hope the Singapore Muslim community will support it so that more halal financial solutions can be offered.

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Writers:

Ezzat Ezzuddin, CPSA

Ezzat Ezzuddin is a young Shariah advocate in the Islamic finance industry. He kick-started his career journey as an Assistant Consultant in Amanie Advisors Sdn Bhd, a global-renowned Shariah advisory firm, where he was entrusted to supervise and oversee Islamic funds by local and international asset management companies. Ezzat then joined Hong Leong Islamic Bank Berhad as an Islamic Graduate Trainee, where he attached with the Shariah department and exposed to wide Shariah issues in Islamic banking operations. Currently, he works as an Executive in Shariah section in BIMB Securities Sdn Bhd, an Islamic stockbrocking services in Malaysia. Upon holding a Bachelor Degree of Shariah Muamalat Management from Academy of Islamic Studies, University of Malaya Kuala Lumpur, Malaysia, Ezzat Ezzuddin then pursued his postgraduate studies in Masters of Islamic Finance Practice (MIFP) in INCEIF University. Aside of his strong proficiency in Arabic language, he also a Certified Professional Shariah Auditor (CPSA) by Islamic Banking and Finance Institute Malaysia (IBFIM). 

Muhammad Ridhwaan Radzi, CSAA

Ridhwaan found his passion for Islamic finance at the school where he graduated from – Madrasah Aljunied Al-Islamiah. He is currently a business undergraduate in NTU and the Managing Director at Islamic Finance Singapore (IFSG). While in the university, he has taken three qualifications: IFQ by CISI. ACIFE in Financial Analysis by Ethica institute and CSAA by AAOIFI.

Editors

Ustaz Aminuddin Abu Bakar

Ustaz Aminuddin is currently the Principal Consultant for S Tradition, a boutique consultancy firm in Islamic Finance. He was part of the senior management team for Kuwait Finance House Malaysia (KFHMB), having served as Vice President and Head of its Shariah Division. He now assumes Shariah Committee roles for HSBC Amanah (Malaysia) and FSAC, PIH Holdings (including as Board member). He holds a Shariah degree from Al-Azhar University and an Executive MBA from the University of Strathclyde (Distinction). He is a Certified Shariah Advisor and Auditor (CSAA) and fellow of AAOIFI, a Certified Shariah Advisor (CSA) and member of the Association of Shariah Advisors in Islamic Finance (ASAS), a registered Shariah Adviser at Securities Commission Malaysia and is ARS (MUIS) certified.

Nana Syafiqa Binte Robani, ACCA

Nana’s commitment towards Islamic Financial Advisory grew stronger as she progressed in the industry in the last 6 years. Also a certified AEPP, she has conducted various seminars over the years to assist with matters pertaining to Islamic Estate Planning. 

Currently a Financial Consultant with Advisors Alliance Group (AIAFA Singapore), Nana is currently in the midst of taking the Masters in Islamic Finance with INCEIF, a major in financial performance with Oxford Brookes University, major in accountancy and audit with ACCA.

Ustaz Haron Masagoes Bin Hasan, CSAA

Haron Masagoes Hassan presently is Senior Executive Wealth Management and the internal Shariah Advisor for the Islamic Wealth Advisory (FAiWA) division within Financial Alliance Pte Ltd. Haron has more than 10 years of working experience in the financial markets. In his role, he works closely with FAiWA’s external shariah advisor, Prof Dr Akram Laldin of ISRA, Malaysia. He completed his Pre-University studies in Madrasah Aljuneid before pursuing his studies in International Islamic University Malaysia (IIUM), obtaining bachelor’s degree in Comparative Religion Studies and Usuluddin. He had completed a certificate in Fundamentals of Financial Services from Chartered Institute for Securities & Investment (CISI).

He is presently also an adjunct lecturer for the International Islamic College and University College of Islam Melaka (under a joint collaboration with Jamiyah Education Centre Singapore) for diploma courses like Principles and Practices of Islamic Banking and Finance & Islamic Law of Transaction.

Muhammad Asyraf Bin Rosli

Asyraf is a Financial Services Consultant from TAQWA Organisation. He is currently serving this role for close to 4 years, approximately servicing under 200 clients. He is currently pursuing Diploma in Syariah Studies by International Islamic University Malaysia (IIUM) and the Certified Islamic Finance Executive by Ethica Institute. He aspires to be an advocate of Islamic Finance and Islamic Financial Planning to better serve the community. He has completed Islamic Financial Planning Course, jointly organised by Financial Alliance Islamic Wealth Advisory (FAiWA) and Islamic Finance Sinagpore (IFSG) in 2021 and The Core Foundations to Islamic Finance organised by IFSG in 2022.

Ustaz Hamrey Bin Mohamad, CSAA

Ustaz Hamrey is a Certified Shariah Advisor & Auditor (AAOIFI) and a Chartered Islamic Finance Professional (INCEIF) majoring in Islamic Finance & Banking and also a graduated of Al-Azhar University, Cairo. He currently serves as a resource person for Islamic Finance Singapore (IFSG) which is a one-stop platform to address any Islamic finance and investment-related needs of the local Muslim community by combining the efforts and strengths of finance professionals and Shariah scholars.

Nasiruddin bin Hussen, CSAA

Nasiruddin is an Islamic Financial Consultant with Ascent Islamic, an Islamic financial planning agency for the Muslim community. He is also a Certified Shariah Adviser & Auditor (CSAA) from AAOIFI. He has vast experience working together with scholars and experts in the field of Shariah and Finance. He headed several projects previously, such as launching the first online Islamic will (wasiat) in Singapore and constructing a Zakat framework for an Islamic start-up. Nasiruddin holds a bachelor’s degree in Islamic Jurisprudence (Fiqh & Usul Fiqh) from the International Islamic University Malaysia and an MSc in Islamic Finance from INCEIF.

References:

1. The four other wealth concepts are: Wealth management, wealth enhancement, wealth maintenance and wealth preservation.
2.  ISRA (2018). Islamic Financial System: Principles and Operations
3.  مجموعة دلة البركة ، فتاوى التـأمين.
4. John Wiley & Sons Pte Ltd (2009). Takaful Islamic Insurance: Concepts and Regulatory Issue
5. ISRA (2018). Islamic Financial System: Principles and Operations

Further Reading or viewing on insurance:

• Insurance In Singapore For Muslims, How Do We Navigate With No Takaful?
• CPF Interest: Halal or Haram?
• AMOM E1: How Do I Cut My Sa-La-Ry? with Wei Choon from the Woke Salaryman and Aini from MFAGROUP
• What’s wrong with interest? An economist explains the wisdom behind Islam’s prohibition of Interest
• Investment Linked policies in Insurance: Muslim Friendly vs Shariah Compliance