Search Here

How Takaful Diff from Insurance

There are several differences between Takaful and conventional insurance. The main differences are that in Takaful, the Participants donate to a shared Takaful Fund to provide protection for each other against risks, whereas in conventional insurance the premium is paid to the insurance company which bears all of the risk.

In addition, any surplus in the Takaful Fund is distributed among Participants and shareholders on the basis of Mudaraba and Wakala models, whereas all profits in conventional insurance belong to the shareholders of the insurance company only. As such, Takaful is based on mutual cooperation whereas conventional insurance is based more on commercial factors.

The third major difference is that Takaful companies adopt strict Shari’a principles in all aspects of their operations, avoiding prohibited concepts such as Riba (interest), Al-Gharar (uncertainty) and Al-Maisir (gambling), supervised by an external Shari’a Supervisory Board