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What are the differences between Takaful and Insurance?
In Islam, we have our guidelines to make any transactions or dealings to
be shariah compliant. Anything that is not shariah compliance is haram.
Therefore, the biggest differences between these two is that Takaful is
shariah compliant while Insurance is not.
The first thing you need to know about shariah compliant is that it has
to follow all these 4 guidelines:
- No riba’
- No gharar (uncertainties)
- No maisir (gambling)
- Nothing that is haram being traded in Islam (pork, wine, champagne, etc.)
The agreement for Takaful is not ‘buying and selling’. It is a
Tabarru’ contract, more like a conditional donation or gift, where you pay your
money monthly to a third-party organization, for them to help any Takaful policy
holder who needs it.
So be clear here - anyone who sign up for a Takaful is not buying
the Takaful product. They are in an agreement of ‘helping’ those in need based
on what was agreed, including themselves. It is also known as ‘risk-sharing’.
Let’s say one of the policy holders is caught in a car accident, the
money will be used to help that person, as a compensation. Based on how much he
paid monthly.
Insurance on the other hand, the agreement when buying Insurance a Muawadhah - where you ‘buy’ the product, or sign up a contract to pay them every month.
But what exactly are you buying? The company? Your safety? I don't know. Thus, it falls into uncertainties or gharar
because you yourself aren’t sure what you are buying.
Furthermore, you are gambling on your life! Which is strictly forbidden
in Islam (maisir or gambling). If anything happened to you, you get compensation.
If not, you don’t get anything. So, someone will benefit, and some don’t.
For a Takaful policy holder, even if you don’t get any compensation for your
monthly payment, you will still get the cash value (dividend). Because some of
the money collected will be used to invest in any shariah compliant stock
market.
Insurance holder however will benefit the same as well but
their dividend might not be shariah compliant, like alcoholic drink or gambling
company.
Below is the recap of what was explained to ensure that you understand
it better. If you have any question about the topic, feel free to ask in the
comment section.
And if any of you are interested in taking takaful, please do contact me in Whatsapp at 011-14888533 (Sabo chan).
Salaam Ramadhan everyone. May this year’s Ramadhan serve to make you
better in both spiritually and physically. Stay at home;)
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