Takaful is another name of Islamic Insurance that allows the premiums received from insured to be pooled into a fund to support each other in case someone gets any damage. In Arabic, Takaful means “guaranteeing each other” and so, Takaful Insurance is an Islamic Insurance theory that is compliant with Islamic law (sharia) and is a mutual risk transfer arrangement which involves operators and participants.
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. Other differences are the relationship between the operators and the participants.
Takaful does not permit uncertainity or gambling when it comes to risk assessment and handling and speculating respectively. Fund management through interest or Riba or investment is also not permitted in Takaful and these three reasons are why conventional insurance goes against the principles of Sharia.
Takaful Products
Takaful Insurance takes a number of forms such as:
- Family Takaful
- Motor Takaful
- Health Takaful
- Medical Takaful
- Life Takaful
- Investment Takaful
- Child Education Takaful
- Home Takaful
- Travel Takaful including travel to Hajj and Umrah
Takaful Providers in Pakistan
In Pakistan, there are a number of Takaful insurance providers list below who are providing a number Takaful products to the masses in Pakistan:
– Jubilee Family Takaful
– EFU Familty Takaful (EFU Hemayah Takaful)
– IGI Takaful
– Adamjee
– Pak-Qatar General Takaful
– Pak Kuwait Takaful
– Takaful Pakistan
– Dawood Family Takaful
Takaful vs Conventional Insurance
So, what is the difference between conventional Insurance and Takaful?
| No | Conventional Insurance | Takaful (Islamic Insurance) |
|---|---|---|
| 1 | This kind of insurance is a Risk Transfer Mechanism with the risk is removed from the policy holder who is the individual as insured to the insurance company in reflection of the insurance premium that is paid by the policy holder | This is simply formed around mutuality which means there is no risk shared between the insured or the insurer which is known as a common pool. Therefore, manager of the pool is the company or the Takaful Operator |
| 2 | There is an element of uncertainty, also known as gharrar which is prohibited in Islam. This uncertainty relates to whether there is likely to be a loss and then how much compensation will have to be paid | The uncertainty that comes with conventional insurance is reduced in Takaful to levels that are deemed to be acceptable under Shari’ah through contributions being made known as conditional donations for a worthy cause |
| 3 | There is an aspect of gambling, which is known as Maisir which is the amount that the insured person pays as a premium in line with the expectation that compensation will be paid. Therefore, if the loss that they are anticipating does not happen, the policy holder will lose the amount that they have paid. However, if there is a loss, then the insurance provider will lose more than they have been paid via the premiums | The contribution (tabarru) paid by the participant is done so in the spirit of Ne’ea and brotherhood and so, it removes the element of massir while also ensuring that the benefit of Takaful is not lost in the same way as it is through conventional insurance |
| 4 | The majority of funds are invested in bonds, TFC’s, and securities to name but a few, all of of which come with fixed interest rates and so, there is an element of Riba to it, which is not permitted in Islam | All funds are invested in Riba-free (non-interest) instruments |
| 5 | Any profits will go straight to the shareholders but the policy holder will not see any returns at the end of the agreed period of cover | All participants will receive any surplus and so, it is paid back to them in relation to the shares of contributions that they have made at the end of the agreed period |
As you are now aware of the differences, it is important that you use Mawazna.com to review and compare the different Takaful products that are offered by leading providers in Pakistan. In doing so, you will find that you have the required information that will enable you to make an informed decision and saving your valuable money and time.
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