Takaful Vs Insurance
There are number of differences which separate the insurance from takaful. Besides the Islamic concept of halal and haram, various points of views can be compared between takaful and insurance.
Aim and Goal
Achieve the largest amount of profit is a main goal of insurance company from premium holder’s amount. Achieving security is the second goal of insurance company which comes after the profit earning in either ways the premium amount could be loose due to this practice.
While in takaful, its main goal is to achieve security for their members by risk sharing among each others. Donation in a central pool is a best way to mitigate the risk where all risk is shared and if invested amount is down due to bad financial markets the security of membership will not be affected.
Ownership of premium and contract
The insured person and the insurance company are in contract in conventional insurance and the insurance company possesses the ownership of amount paid by policy holder and has the authority to use this amount in any means
In takaful the contract is made between all members. The takaful company only charges the fee from members to mange their amount and on behalf of members invests the amount. The ownership of amount, profit/loss belongs to the members only. Company is liable to answer the members that where his/her amount is being invested. The donated amount is only use to mitigate the risks in case of death or dismemberment of members.
Investment and Returns
Conventional insurance invest the amount in any investing opportunity. Their investment contains the interest, gambling and uncertainty. The returns from invested amount is belongs to the insurance companies. It is their own interest and will that how much profit will be return. All burden of loss is imposed upon premium holders and full profit is not given to the insured persons
There is no interest, gambling and uncertainty is involved in takaful. All profit/loss belongs to the members of takaful company and takaful company distributes that profit/loss equally among the members. Takaful operators invest in only shariah compliance businesses on behalf of members. Company only deducts the operating cost from investments and donated pool.
Loan and termination of policy
If an insured member needs a loan from insurance company, the insurance companies provides the loan from member’s contributed amount on some percentage of interest and that interest is only belongs to the company. Insurance company terminates the policy when member/s is not able to pay next installment without returning the incurred previous profit. All the profit is forcibly captured by the insurance company.
Takaful company only provides the Qarz e Hasna from their onwn amount and gives the opportunity to membership holders to return it on their own convenience. No interest is charged from given qarz e hasna and members return that qarz e hasna during his membership period. Another facility provided by takaful is, if member is not able to pay its next due installment, it provides the opportunity to submit the contributed amount in any upcoming year. Takaful company deduct the Waqf donation from members profit by which the security of members could not be affected and their policy prolongs
Takaful provides more facilitations than the insurance. It could not harm the membership of contributors till the end of tenure ship. And if a person wants to stop the membership during tenure ship, takaful operators provide the incurred profit, if any, to the members.