Difference Between Takaful And Insurance

Takaful is a relatively new insurance product that is marketed as an islamic alternative to conventional insurance and is often referred to as islamic insurance. The following table summarizes the main differences between both systems. In case of the deficit of a participants takaful fund the takaful operator wakeel provides free interest interest free loan qard hasan to the participants.

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The Difference Between Takaful And Conventional Insurance

Insurance Vs Takaful

Takaful Islamic Insurance Islamic Bankers Resource Centre

Fundamental Differences Between Takaful And Insurance Download Table

Summary Of Differences Between Takaful And Conventional Insuareance Download Table

Takaful Islamic Insurance Islamic Bankers Resource Centre

Always wondered what is the difference between takaful and life insurance.

Difference between takaful and insurance. 2 3 difference between takaful and conventional insurance takaful conventional insurance. The main different between conventional insurance and takaful is the way in which the risk is handled and assessed along with the management of the takaful fund. Takaful islamic insurance differences between takaful and conventional insurance 1. Although both conventional and takaful businesses generate proﬁts for the shareholders in takaful business the expenses paid to the shareholders are explicitly transparent in conventional insurance they are not necessarily so.

It is a co operative institution according to the principles of contract which is mutual co operation ta awun. Conventional insurance involves making investments that can incur risk and generate profits that will be retained by the company while under takaful investment profits are distributed among both participants and shareholders on the basis of mudaraba or wakala models. Other differences are the relationship between the operators and the participants. The wakalah charge is similar to a service fee.

Having said that there are major differences in the workings of the two systems stemming from the fact that takaful adheres strictly to the islamic principles it was developed upon. Takaful does not permit uncertainity or gambling when it comes to risk assessment and handling and speculating respectively. Ahmad ali khan 2003. Differences between islamic and conventional insurance lie in the ownership and financing of the company in the management and accounting systems in the entities in which the premiums are invested etc.

Both takaful and conventional insurance policies work on the same basic system which is the pooling of funds to manage the risk of a group of people. Although both offers the same purpose which is to protect the insurer there are some major differences between both. Ahmad ali khan 2003 it is a business institutions operated upon the principles of contract which is exchange. Conventional insurance typically charges a fixed commission fee of 2 whereas takaful operators might impose a wakalah charge depending on the product and model.