Differences Between Takaful and Insurance PDF

DIFFERENCES BETWEEN TAKAFUL AND INSURANCE  # Pertinent Issues Takaful Insurance 1 Essence of Intention Intention is to create spiritual Intention to create legal and legal relationship...

DIFFERENCES BETWEEN TAKAFUL AND INSURANCE  # Pertinent Issues Takaful Insurance 1 Essence of Intention Intention is to create spiritual Intention to create legal and legal relationship relationship only 2 Formalities Unilateral for Tabarru’ & Bilateral contract bilateral contract for (The bilateral contract is Mudharabah & Wakalah the most common kind of (The unilateral contract which binding agreement. Each DIFFERENCES only requires one party to party is both an obligor (a BETWEEN express the contribution person who is bound to TAKAFUL & without requiring any kind of another) to its own INSURANCE exchange.... Without this promise, and an obligee (a concept of donation, the person to whom another transaction will be similar to is obligated or bound) on the insurance practise which the other party's required any exchange or promise.) returns as buying and selling contract.) 3 Accounts Treatment General Takaful – Tabarru’ – General Insurance – donation account General Insurance Family Takaful – Participant Account Special Account Life Insurance – Life Participant Account Insurance Account  DIFFERENCES BETWEEN TAKAFUL & INSURANCE # Pertinent Issues Takaful Insurance 4 Subject Matter Subject matter must be Must be Common Law justified Shariah justified 5 Payment of Paid contribution - portion Premium paid is an obligation contribution / will be treated as donation of the insured to insurer as premium (Tabarru’) stated in the contract. 6 Forbidden Based on Islamic principles Insurance policies evolves Elements around the elements of gharar, maisir & riba DIFFERENCES BETWEEN TAKAFUL & INSURANCE # Pertinent Issues Takaful Insurance 7 Profits Shared between participant and the At the discretion of the company takaful operator 8 Contract Combination of Tabarru’ and agency Exchange contract between insured or profit sharing contract and insurer based on sale & purchase agreement. 9 Indemnity Provided by the Takaful Fund Provides indemnity from the company’s fund. (premium collected from the insureds) DIFFERENCES BETWEEN TAKAFUL & INSURANCE # Pertinent Issues Takaful Insurance 10 Operational Principle Shariah compliance Non shariah compliance 11 Risks Treatment Risks sharing concept among Risk transfer concept participants 12 Benefits Paid from the defined funds under Paid from the fund legally owned by joint indemnity borne by the the company participants 13 Taxation Zakat Tax 14 Profits / Bonus Shared between the participant and Shared with participating policies company  # Pertinent Issues Takaful Insurance 15 Responsibility of Participant make Policy holders pay Participants / contributions to the scheme. premium to insurer Policyholders Participant mutually DIFFERENCES guarantee each other under the scheme BETWEEN TAKAFUL & 16 Liability to the Takaful Operator acts as the Insurer is liable to pay the INSURANCE Takaful Operator / administrator of the scheme insurance benefits as Insurer and pays the takaful benefits promised from its assets from the takaful funds (insurance funds & shareholders’ fund) 17 Investment of Shariah compliant No restriction from those funds instruments imposed for prudential reasons