Takaful

There are several differences between the General takaful and the conventional insurance. However, this summary will be based on the conceptual and operational differences between the islamic insurance and conventional insurance. The basic idea of an insurance is that of mutual cooperation between two parties the insurer and the insured, to minimize the risk of future unexpected losses through the indemnification of the insured. 

The general takaful which is guided by the islamic law of syariah is an alternative to the conventional insurance. The system of Aaqilah laid a solid foundation for the general takaful, it was an agrrangement of mutual help or indemnification customary in some tribes at the time of the holy prophet (S.A.W). The general takaful is essentially a concept of joint guarantee/taawan, the system is operated on the basis of taawan and tabarru(donate). Where Participants mutually agree to help guarantee and indemnify one another through their donations but conventional insurance started with the aim to earn profit which is based on compensation of loss in exchange of premium which is paid by the insured.it is also based on the idea of social solidarity, an agreement made by the members to jointly indemnify the loss or damage that may inflict anyone of them out of the fund they donate collectively but in the conventional setup loss is indemnified by the insurance company according to the terms and condition of the policy. Another conceptual difference between the takaful and conventional insurance is that risk in takaful is distributed among participant who agreed to jointly assume risk. Unlike the conventional insurance where the operator agrees to undertake the risk of the other party in exchange of premium, the takaful operator acts only as a fund manager and does not undertake any risk. Overall, Based on a conceptual framework the main purpose of takaful under the islamic system, is to bring equity to all parties involved and the objective of...