takaful vs insurance

Conventional Insurance
Point Of
Differences
 
 
Risk mitigation Risk is transferred from
insured person to
insurance company in
consideration of
premium paid by
insured

 
Key concept

 

Takaful

It is based on
mutuality hence the
risk is not
transferred but
shared by the
participants who
form a common pool.
The company only as
a manger of the pool.
It contains the element The element of
of riba and gharrar
gharrar is brought
down to acceptable
levels under shariah
by making
contributions as
conditional donations
for a good cause.
It contains the element The participants pay

Point Of
Differences
 
Investment

Surplus &
profits

Surrender

Conventional
Insurance
 
Preferred stocks and
other fixed interest
bearing instruments.

All surplus & profits
belong to the
company except in
permanent life
insurance
 
Term life insurance:
nothing is paid

Takaful
 
Shariah
compliant
investment. For
example
common stock,
islamic banks.
 
Surplus and
profits belongs
to work fund.

In general
takaful: surplus

Point Of
Differences
Investment
ownership
 

Conventional
Insurance
Investment is made
by the company on
its own behalf.
 

Takaful

Investment
portion is of the
participant, he
can withdraw at
any time after 2
years.
 
Policy
In
case
special Policy provide in
Provide
diseases like cancer case of every
 
no policy provide.
disease.
 
Catastrophic In case of more
In case of deficit
Losses
losses occur
qard-e-hasna
 
company is in deficit allot to waqf