Comparison between Takaful and Conventional Insurance
In Takaful, everyone’s risk is shared. So, the pool of money does not belong to the Takaful operator, who is only managing it. It belongs to all those who participate in the scheme.
Takaful
- Takaful is based on mutual cooperation.
- Takaful is free from interest (Riba), gambling, (Maysir), and uncertainty (Gharar).
- Takaful is based on the simple community of coming together to help one another.
- All or part of the contribution paid by the Participant is a donation to the Takaful Fund, which helps other Participants by providing protection against potential risk.
- Islamic insurance is free from interest. It is based on the profit sharing financing technique call Al Mudarebah.
- The Plan Owners’ and shareholders’ capital is invested in investment funds that are Sharia’a compliant.
- Any surplus in the Takaful Fund is shared among Participants only, and the investment profits are distributed among Participants and shareholders on the basis of Mudaraba or Wakala models.
Conventional Insurance
- Conventional insurance is based on commercial factors.
- Conventional insurance includes elements of interest.
- The premium is paid to conventional insurance companies and is owned by them in exchange for bearing all expected risks.
- All surpluses and profits belong to the shareholders only.
- The capital of the premium is invested in funds and investment channels that are not necessarily Shariah Compliant.
- Premium paid by the Policyholder is considered as income to the company, belonging to the shareholders.
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