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In: Finance
Discuss the differences between Takaful and conventional insurance. ( in 100 words)
Discuss the differences between Takaful and conventional insurance. ( in 100 words)
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Expert Solution
Takaful insurance is a type of Islamic insurance. It provides protection based on shari'ah principles. The term Takaful means joint guarantee. It is based on principles of mutuality. The funds are managed by the takaful operator on behalf of the participants which will be beneficial for the participants. Contributions are invested into Halal or shariah compliant funds whenever there is surplus , it is shared among participants. It is a Win-Win situation for the participants. Takaful insurance prohibited the investment from incomes like alcohols tobacco for gambling etc. in takaful insurance the operator is a risk manager whereas in conventional Insurance insurance company is a risk taker. Sometimes the operator in takaful insurance too bear the risk. In conventional insurance the risk transfer model is followed whereas in takaful insurance risk sharing model is followed. Conventional insurance are not based on shariah law.
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