What makes Takaful different from insurance? Isn’t the function is just the same like other insurance?
In conventional insurance, the risk is transferred from the insured to the insurer. Takaful, on the other hand, is based on shared risk . Each participant donates to a Takaful fund and in the event of loss, the participant will receive the amount of its claim
The purpose of takaful and insurance is the same, that is to plan life protection. However, the concepts and features are different.
In insurance, you pay for the premium in exchange of a guarantee compensation if the event stipulated in the contract happens. This is a probabilistic contract whereby the loss event may occur or may not.
Meanwhile, Takaful use tabarru contract whereby the participants contribute regularly to a fund and willing to jointly guarantee each other. Moreover, if you want to take the whole life takaful plan, it only invest the saving funds to the halal business. Therefore, takaful is preferable for Muslims.