Are there any differences between takaful and conventional insurance?


#1
  • Unlike conventional insurance, which risk is transferred from the insured to the insurer, the Takaful
    Insurance mutual risk is shared among the participants.

  • Takaful operations are based upon the principles of mutuality, whereby each participant makes a donation to a Takaful fund.

  • In the event of its loss, the participant will receive the amount of its claim.

  • All investments managed by the takaful operator are made in accordance to the Shariah law.

  • These funds are managed by the takaful operator on behalf of the participants, which will be beneficial to the
    participants.

  • On top of that, unlike conventional insurance, the participants retain an ownership interest in the takaful
    fund. Contributions from the participants are later invested into a ‘halal’ or Shariah-compliant funds to
    derive investment income.

  • In the event when the fund generates a surplus, it is then shared among the
    participants (and, in some cases with the takaful operator). This creates a ‘win-win’ situation to all
    participants.

  • The takaful operator will also have a Shariah’s Advisory Board who will monitor the activities of the
    operations in order to ensure that it’s Shariah-compliant. This involves consideration of all aspects of theoperations.

  • Takaful and conventional insurance companies share the same objective which is to provide
    protection to you, your loved ones and your valuable possessions.

source: Takaful Malaysia