Customer
Takaful customers are known as participants.
Insurance customers are known as policy holders.
Protection Agreement
The protection agreement between the takaful company and a participant is known as a certificate.
The protection agreement between an insurance company and a policy holder is known as a policy.
Fees
Takaful fees are called contributions.
Insurance fees are called premiums.
Operating Principle
Takaful operators charge a fee for managing the contributions made by participants. The rest of the contribution goes towards a fund shared by all participants. Any claims made by participants will be paid from this fund. This is known as ta’awun. Any excess funds after the claims are paid and reserves provided for will be equally shared by the participants.
Insurance companies derive their income from premiums collected. The policy holders and the insurer have entered a contract whereby the insurer will pay out claims based on the contract (policy) specifications. Any claims made by policy holders will be paid from this income.
Compliance
Takaful is bound by shariah and local government laws.
Insurance is bound by local government laws.
Investments
All takaful investment portfolios are strictly bound by shariah rules (no gambling, usury, uncertainty, etc.).
Insurance investment portfolios can include a variety of businesses and industries.
Risk
Risk is shared across all participants.
Insurance providers take on all risk.
Death Benefits
For Muslims, takaful death benefits can be gifted to anyone as hibah. Non-Muslims can will their death benefits to anyone.
For non-Muslims, insurance death benefits can be willed to anyone. For Muslims, the distribution of death benefits will be bound by faraid rules.
