Monday, 2 September 2019

Differences between Takaful and Conventional or Traditional Insurance Policies

Clearing All Your Doubts So You Can Make Your Decisions With Ease!


Insurance

People from all over the world believe in a worry free and stress free life. Mostly people from the western continents believe in living in a secured life so that you do not have to worry about what is going to happen after this or that. This is basically the mindset of the people living in those regions. Thus, they purchase all kinds of insurance policies to remain secure of maximum ends.

This means their houses are insured against the house insurance or fire insurance. Their cars or any other vehicles are also always insured against the car insurance. Also, all their kids and themselves are insured against life or health insurance policies. In this way, they pay an amount on yearly basis as the premium for insurance but they live a stress free life against it.

Concept of Takaful

The insurance concept and the policies are accepted and appreciated throughout the world. However, on the basis of Islamic religious values and certain clashes occur in the policies and also on how they work. The religion has certain values that the insurance concept is in clash with. Thus, the Islamic version of insurance or you can say the substitute according to the Islamic values was found and it is marketed widely with the name of ‘Takaful’.

Introduction to Takaful

Takaful is an interesting concept which was introduced in place of Insurance policies and it is complaint with the Islamic values. The options coming under the umbrella of Takaful have their grounds based on the concepts of Islamic transactions of the products. It is an Arabic term and it means that ‘giving each other a guarantee’ or ‘giving one’s own word as a guaranty against something’.

Explaining Takaful

Takaful is a concept which has its total peace with the Islamic laws and regulations which is called ‘Shariah’ in the original Arabic language. It is based upon the Islamic concept of insurance which is all about welfare and mutual cooperation amongst each other.
 
Under the Takaful concept, a number of people make a pool of their funds. The pool is filled by financial resources from everyone and all the parties (often the insurer and the insured parties) share the risk and funds factor coming from those funds.

These funds are collected in a mutually made Takaful pool and they all are benefited by the pool as they all collectively contribute those funds which are also called ‘Tabarru’ in Arabic language which is the origin of the term as well as its Islamic concept.

Products Offered Under Takaful Umbrella

As we mentioned that Takaful has been introduced in place of the conventional concept of insurance. It must cover all the areas which insurance was covering before and that is as it should be. There are a number of Takaful products being offered in the financial market in this age. We have enlisted a few for you which offers Takaful for:
  • Motor or Car or any Machinery
  • Family
  • Self-Health
  • Life
  • Medical
  • Investment or Business
  • Home (can be said again fire or any natural disaster like earthquake, hurricane etc.)
  • Child Education
  • Travel (especially for the travelling for Hajj or Umrah i.e. Pilgrimage)
 

Clearing the Differences between Traditional Insurance Concepts and Takaful

We understand the confusion behind finding he differences between the Insurance concepts and Takaful itself while both are being offered to offer the insured with the security purpose and protection. However, some of very critical clashes have occurred within both the concepts. One of the main and clear difference is that insurance is old, friendly and traditional method that everyone understand. While, Takaful is comparatively a newly introduced substitute for insurance which abides by the Islamic Shariah. 

Takaful Concepts

  • Concepts for Takaful say that it comes with the idea of mutual cooperation among the people opting for the Takaful or Islamic insurance. It promotes welfare and the idea of brotherhood as well.
  • It covers the Islamic laws of Shariah and also does not go against the government laws.
  • Takaful gives the insured the guaranty that the funds in Takaful will remain free from any kind of:
  1. Uncertainty
  2. Gambling
  3. Interest  
  • The risk and funds both are collectively shared and distributed among all the parties agreeing to collect their funds as ‘Tabarru’ in the Takaful pool.
 

Traditional Concepts of Insurance 

  • The insurance introduced previously has the concepts of the commercialism only. It has the commercial approach of saving for your own future with the insurance company who pay a cash benefit value at the time of maturity too.
  • The insurance has its concept only according to the state’s laws and the government policies.
  • There can be an element of all three terms mentioned which are considered unacceptable under the Islamic law binding and religious values.
  • The risk factor is totally shifted from the insured party towards the insurance companies who are acting as an insurance provider.
 

Conclusion

After the whole discussion, we would conclude the topic with the acceptance that we may have been able to clarify the differences between the conventional concepts of traditionally used insurance policies from the newly introduced Islamic insurance concept which is known as ‘Takaful’.

One more thing should be taken in accordance with is that the Takaful works on a policy of no claim for taking the cash back. If the insured person does not asks or claims against any kind of damages, the he or she will get back an amount in the form of cash which will be decided by the agent dealing with their Takaful policy. 

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