Point Of

Differences
Risk
mitigation

Key concept

Mode of
contribution

Conventional
Insurance

Takaful

It is based on
Risk is transferred from
mutuality hence
insured person to
the risk is not
insurance company in
transferred but
consideration of premium shared by the
paid by insured.
participants who
form a common
pool. The
company only as
a manger of the
pool.
It contains the element of The element of
riba (Funds are mostly
gharrar is
invested in fixed interest brought down to
bearing instruments like
acceptable levels
bonds, TFCs, securities,
under shariah by
etc. and gharrar.
making
contributions as
conditional
donations for a
good cause.
It contains the element of The participants
maisir in that the insured pay the
pays an amount
contribution in
(premium) in the
the spirit of
expectation of gain
purity and
(compensation/payment
brotherhood
against claim). If the
hence it negates
anticipated loss (claim)
the element of
does not occur, the
maisir.
insured loses the amount
paid as premium. If the
loss does occur, the
insurance company loses
a far larger amount than
collected as premium and

the insured gains by the

same.
Shariah
compliant
investment. For
example
common stock,
islamic banks.

Investment

Preferred stocks and

other fixed interest
bearing instruments thus
eliminating the element
of risk from investment.

Surplus &
profits

Surplus and
All surplus & profits
profits belongs to
belong to the company
work fund.
except in permanent life
insurance where the cash
value can be accessed by
the insured.
In general
If a person holding term
takaful: surplus is
life insurance policy
paid
surrenders the policy
In family
then he gets no refund of takaful :cash
premiums and no other
value plus
amount is paid to him.
surplus ( if any) is
paid.
Whole life insurance:
cash value accumulated
is paid after deductions.
Investment is made by
Investment
the company on its own
portion is of the
behalf to earn profit and
participant, he
is considered as income
can withdraw at
of company.
any time after 2
years.

Surrender

Investment
ownership

Policy
Provide

In case special disease

s like cancer no policy
provide.

Policy provide in
case of every
disease

Catastrophic
Losses

In case of catastrophic
losses like flood or
earthquake no coverage
is provided by insurance
companies.

In case of deficit
qard e hasna
allot to waqf fund
to provide
coverage to the
participant