Differences Between Conventional and Islamic or Shari Insurance

The difference between the conventional and Islamic or Shari insurance is as follows:

1. From the side of the Basic Principles

Conventional and Takaful insurance they both both assigned to manage and mitigate risk, only in the Takaful concept of management is done by using a pattern of mutual risk between the organizer and the participants (risk sharing) or referred to at takaful and at tadhamun. Conventional Insurance currently in work patterns is the transfer of risk from clients (participants) to the company (manager), the so-called transfer risk. So the risk that the participants will be borne fully by the manager.

2. From the Side Agreement

In certain parts of sharia insurance is tabarru (humanitarian contribution) and ta'awun (mutual help), and wakalah and Mudharabah (profit sharing). Whereas in conventional insurance, the transaction is buying and selling that is al gharar (speculative).

3. From the side belonging Fund

In the Conventional Insurance funds paid to the company's customers (premium) to be owned by the company in full, especially if the participant does not do anything during the period of insurance claims. While in Takaful funds still belong to the participants, after deducting financing and fee (ujrah) company. Because in Takaful, the company only as a fiduciary (representatives) who are paid by the participant, or often referred to as al Wakalah bi al Ajri. Companies can also sebgai fund manager (mudharib) in the contract Mudharabah (profit sharing). In fact there are companies returned underwriting surplus fund management tabarru'nya to participants as long as no claims on the insurance period. Or the company as fund manager

4. From the object

Takaful only limit management on objects of legal insurance and does not contain doubtful. Therefore, should not be made the object on things that are haram or doubtful, as the buildings are used for immoral, or factories liquor and cigarettes, even hotels that are not sharia. The Conventional Insurance does not distinguish objects that are haram or halal, which is important profitable.

5. From the Side of the Investment Fund.

Funds from the collection of premiums from participants for not worn, the Islamic insurance companies invested in keuangaaan institute sharia or the lawful projects which are based on wages or profit-sharing system. As for the conventional insurance investment management system which contains usury interest and speculative (gharar).

6. From the side of the Payment Claim.

In Islamic insurance claim payment deducted from account tabarru (social fund) of all participants, which from the outset intended to diinfakkan for the sake of helping each other in case of a disaster in some or all of the participants. Whereas in conventional insurance claim payment is taken from the fund company since the beginning the agreement that all premiums belong to the company and if there is a claim, it automatically becomes expenditure to the company.

7. From Side Control.

Takaful contained in Sharia Supervisory Board (DPS), something that is not got on the conventional insurance.

8. From the zakat, infaq and sadaqah

In Takaful no obligation to issue a zakat as the provisions of Islamic law. As in conventional insurance is not known the term zakat.