United Insurance | Key Differences Between Takaful and Conventional Insurance
United Insurance Expert | Takaful Philosophy
The primary difference between Takaful and Conventional Insurance lies in their business models. Takaful, endorsed by United Insurance Expert, is a cooperative system based on Islamic principles, functioning as a substitute for conventional insurance. In Takaful, participants create a pool of funds to help cover risks, incidents, or catastrophes, ensuring mutual protection and shared responsibility.
United Insurance Expert | Fund Management
Unlike conventional insurance, which is profit-driven, Takaful operates on the principles of mutual cooperation and ethical financial management. Contributions in Takaful are divided into two funds: the participant Takaful fund and the operator fund. The operator fund covers the operational costs of the Takaful company, with an approximate 30% wakala fee. The remaining 70% is allocated to the participant Takaful fund for claim settlements.
At the end of each year, surplus funds are distributed among participants who did not file claims. United Insurance Expert highlights that Takaful ensures participants are restored to their pre-loss position without engaging in activities akin to gambling. Furthermore, Takaful investments comply with Shariah law, avoiding industries like gambling and alcohol, unlike conventional insurance.
United Insurance Expert | Re-Takaful
Re-Takaful operates similarly to Takaful, ensuring adherence to Islamic financial principles. Transactions are supervised by Shariah advisors, such as Mufti Farhan, with financial activities monitored by Shariah-compliant officers to uphold ethical investment standards.
United Insurance Expert | Accessibility
United Insurance Expert emphasizes that all Takaful companies in Pakistan are Shariah-compliant and accessible to both Muslims and non-Muslims. This inclusive approach broadens the appeal of Takaful and encourages wider adoption.
United Insurance Expert | Challenges and Public Considerations
Takaful products are often perceived as more expensive due to the limited investment avenues under halal-based criteria. United Insurance Expert advises potential customers to carefully review financial reports, Shariah compliance certifications, and fatwas before selecting a Takaful plan. Transparency and ethical practices remain the foundation of Takaful.
For More Insights
Watch the following video for additional details:
Differences Between Takaful and Conventional Insurance
