tabarru fund
Also called: tabarru
A mutual-help fund in sharia insurance used to pay claims.
What it means
The tabarru fund is a pool of sharia insurance participants' contributions set aside for sharing risk. This fund is separated from the company's funds and is used to pay claims or benefits to participants who experience misfortune. Participants do not have a personal claim on the tabarru fund, because it is by nature a shared fund of goodness. Its management is governed by the contract and supervised by a sharia supervisory board.
Why it matters for families
Understanding the tabarru fund lets families know where their contribution money goes. Part of the money does not become personal savings but a mutual-help fund that can be used up for claims. Misunderstanding can trigger disappointment when a participant leaves and thinks all their contributions can be withdrawn. Know the tabarru portion and the investment portion in the policy.
Example
For example, a monthly contribution of Rp600 thousand, with a tabarru portion of Rp150 thousand and the rest for costs and investment. If within a year there are several claims from other participants, the tabarru fund is drawn down for benefits. A participant who leaves cannot demand the return of the tabarru portion because that fund is not personally owned.
Common misunderstanding
Many assume the tabarru fund is the same as savings that can be withdrawn at any time. In fact, the tabarru fund is a shared fund of goodness to cover claims, not a participant's personal balance.