CALCULATING ZAKAT ON INSURANCE
Zakat on Insurance is only applicable to savings endowment policies – where the intention is to grow your wealth.
The amount of Zakat you have to fulfil is 2.5% of the surrender value.
For example, when your surrender value reaches or exceeds the Nisab on the 10th year of the policy, you are required to pay Zakat on Insurance for that year and for subsequent years (as surrender value increases every year).
There are two types of Zakat on Insurance:
1 . Conventional: 2.5% of the surrender value at the end of the year when Haul and Nisab are reached.
2. Takaful: 2.5% on the premium paid for the year when Haul and Nisab are reached.
STEPS TO CALCULATE ZAKAT ON INSURANCE
Determine the start date of the insurance plan or the date when Nisab was/is reached.
This is based on the surrender value of your insurance plan.
Find out the surrender value from your insurance statement or insurance agent.
Determine when your surrender value meets/met the Nisab.
Zakat amount is:
Surrender Value x 0.025
EXAMPLE
Nisab: $4,000
Determine Haul (when Surrender Value reaches Nisab): Year 7
Surrender Value at Year 7: $4,046
Zakat to be paid: $4,046 x 0.025 = $101.15
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