The document compares and contrasts insurance and takaful. It provides details on: 1) Insurance is a contract where one party agrees to take on the risk of another in exchange for premium payments. The risk bearer is the insurer and the party whose risk is covered is the insured. 2) Takaful is an Islamic insurance system based on mutual assistance and donation, where risks are shared collectively. It follows the principles of tabarru (donation) and ta'awun (mutual guarantee). 3) There are several takaful models including mudarabah, wakalah, and waqf models. The waqf model establishes a waqf fund through shareholder contributions to compensate

1. INSURANCE vs TAKAFUL
Presented by:
M. Asim Qaseem
Uzair Nawaz
Fakhar Tayyab
M.Burhan Ali
Zayed Saleem

2. INSURANCE
 Insurance is a contract between two
parties
 One party agrees to undertake the risk
of another in exchange for consideration
known as premium and promises to pay
a fixed sum of money to the other party
on happening of an uncertain event or
after the expiry of ascertain
 The party bearing the risk is known as
the 'insurer „
 The party whose risk is covered is
known as the 'insured'

3. TYPES OF INSURANCE
1) Life insurance
2) General insurance

4. 1) LIFE INSURANCE
Life insurance provides a monetary
benefit to:
 A decedent's family or other
designated beneficiary
 May specifically provide for income to
an insured person's
family, burial, funeral and other final
expenses.

5. LIFE INSURANCE POLICIES
 Profits paid to the beneficiary either in
a lump sum cash payment or an
annuity
 Annuities and pensions that pay a
benefit for life are sometimes regarded
as insurance against the possibility
that a retiree will outlive his or her
financial resources
 Annuities and endowment policies are
financial instruments to accumulate or
liquidate wealth when it is needed.

6. General Insurance
Zayed Saleem

7. 2) GENENRAL INSURANCE
An insurance policy that protects you
against losses and damages
(unforeseen) other than those covered
by life insurance

8. TYPES OF GENERAL
INSURANCE
a) Vehicle insurance
b) Health insurance
c) Home insurance
d) Property insurance

9. a) VEHICAL INSURANCE
“Auto insurance protects you against
financial loss if you have an accident.”
 Auto insurance provides:
 Property
 Liability
 Medical coverage

10. b) HEALTH INSURANCE
 Medical and Health Insurance
(MHI), is an insurance policy which is
designed to cover the cost of private
medical treatment, which can be very
expensive, especially with
hospitalization and surgery

11. c) HOME INSURANCE
“Home insurance provides
compensation for damage or
destruction of a home from disasters.”
 In some geographical areas, the
standard insurances exclude certain
types of disasters, such as flood and
earthquakes

12. d) PROPERTY INSURANCE
“Property insurance provides protection
against risks to property, such as
fire, theft or weather damage.”
 This includes specialized forms of
insurance such as:
 Fire insurance
 Flood insurance
 Earthquake insurance
 Home insurance

13. Takaful
M.Burhan Ali

14. Takaful
 Takaful is an Arabic word that means
“Guaranteeing each other”.ƒ
 It is a system of Islamic Insurance based on the
principle of TA‟AWUN (mutual assistance) and
TABARRU‟ (Gift, Give away, donation) where
the risk is shared collectively by the group
VOLUNTARILY.
 This is a pact among a group of members or
participants who agree to jointly guarantee
among themselves against loss or damage to any
of them as defined in the pact.

15. Models Of Takaful
 Mudarabah Model
 Wakalah Model (hybrid of Wakalah &
Mudarabah)
 Wakalah based on Waqf Model.

16. Mudarabah Model
 ƒ The participant and the operator enter into a
Mudarabah contract from the beginning of the
relation, for indemnification and share of the
underwriting results.
 ƒ The Surplus is shared between the participants
and the takaful operator in an agreed ratio.
 ƒ This model allows the takaful operator to
share in the underwriting results from operations
as well as the favorable performance returns on
invested premiums

17. Mudarabah Model
 Shariah Concerns.
The relation between the participants is that of
tabarru‟ and not Mudarabah, “Profit Sharing”
can‟t be applied here. Donation cannot be
Mudarabah capital
at the same time.
 ƒ In a Mudarabah contract, a profit is to be
generated to be distributed. Profit is not the same
as „Surplus‟ (excess pf premiums over
claims, reserves and expenses) and in the
insurance context no definition can be generated
by definition.

18. Mudarabah Model
Shariah Concerns
 The sharing in underwriting surplus itself is
something which is similar to making this
into a commercial business venture and not a
mutual contract for assistance and protection.
 The requirement to provide Qard Hasanah
(in case of a deficit) in a Mudarabah contract
by definition is against the concept of
Mudarabah which is a profit sharing contract
and a Mudarib cannot be a guarantor.

19. Wakalah Model
Fakhar Tayyab

20. Wakalah Model
 Islamic Transaction System is a dynamic system
and in line with current needs of the ummah
(people).
 Although the concept and basic principles
outlined by Islam in its Transaction (Muamalat)
system seemed more 'traditional', it can be
processed in a very practical and able means to
meet the financial needs of modern and complex
community.
 This is the best part of Islam which holds no
boundaries not only in time but also geography.

21. Wakalah Model
 The Wakalah contract is among the treasures
of Islamic Transaction system that has been
popularized and its application tailored in
various facilities in the contemporary Islamic
financial system.
 The word Wakalah is taken from the Arabic
word which means representative.
 The fuqaha (jurists' representatives Islamic
scholars) have agreed that the deed must be
in accordance with syara' and must be based
on is permissible according to syara‟ and has
been proved by the Holy Quran.

22. Wakalah Model
 The Wakalah contract is made into
Islamic laws shows evidence that
human behavior is weak, cannot live
alone and require one another to
manage the affairs of life. Islam
promotes the use of Wakalah
principles in various fields of activities
as long as they do not conflict with
Islamic laws.
 Wakalah contract is divided into
General Wakalah, Special
Wakalah, Paid Wakalah and Unpaid

23. Wakalah Model
 The General Wakalah is a Wakalah in matters that
are not specified such as a representative in all
business transactions, or being a representative
without any prescribed goods to be sold or
purchased.
 A Special Wakalah is a representative devoted to
matters such as sale and purchase of homes or
cars, or rental properties such as land, houses and
buildings. Special Wakalah is bound by the matter
or affair devoted to him.
 Paid Wakalah is required permissible by Syara'.
 Unpaid Wakalah is a representative who works
voluntarily without any form of payment.

24. Wakalah Model
 The Wakalah concept is practiced by most of
the takaful operators in Malaysia and this is a
necessary tool to market the takaful products
to the society.
 Under the Wakalah system, the
representative is necessarily associated with
four characteristics, Siddiq
(Honesty), Amanah (Trust), Tabligh (Passing
Preaching) and Fatanah (Wise Wisdom).

25. Waqf Model
Asim Qaseem

26. Waqf Model
 ƒ In order to eliminate the element of
“Mayser”, the concept of „Waqf‟ and
„Tabarru‟ is incorporated. In relation to this
participants shall agree to relinquish as
“donation” certain amount of money.
 The Takaful Fund, consisting of the
contributions paid as Tabarru, will be further
invested by the Company based on the
principle of Islamic modes of
Trades, through which the element of interest
(riba) will be replaced.

27. Waqf Model
Basic Features
 ƒ A Waqf Fund is established by the
shareholders of Takaful Company through
the contribution of „Ceding amount‟ (part of
the Capital) to compensate the beneficiaries
or participant of Takaful scheme. The Ceding
amount of the Waqf will remain invested.
 ƒ Any person by signing the proposal
form, contributing to the Waqf and
subscribing to the policy documents shall
become the member of the Waqf fund.

28. Waqf Model
Basic Features
 ƒ The Waqf Fund will lay down the rules for
distribution of its funds to the beneficiaries
and will decide how much compensation
should be given to a subscriber/member .
 The Waqf will become owner of all
contributions and has the right to act as a
legal entity as per its terms for
investment, compensations and dealing with
the surplus amounts.

29. Waqf Model
Basic Features
The Takaful Company may distribute the
surplus amounts on the following three basis:
 A portion of surplus should be kept as
reserve to mitigate the future losses.
 A portion of surplus should be distributed
among the participants to differentiate it
from the conventional insurance procedures.
 A portion of surplus should be utilized for
the charitable purposes every year.

30. Waqf Model
Basic Features
 As per the rules of the Waqf, if the fund is
liquidated, the outstanding balance, after
paying all dues and payables, will be
utilized to charitable purposes.
 The Takaful company, while managing the
Waqf Fund, will play two different roles
simultaneously:

31. Waqf Model
 Operator/Manager:
As Operator/Manager, the Takaful Company will
perform all functions necessary for the operations
of the Waqf against a Wakala fee to be deducted
from the Contributions of the Participants.
 Mudarib:
As Mudarib of the fund, the Takaful Company
will manage the investment of the excess
funds of the Waqf into Shariah compliant
investments and will participate in the profit of
the fund‟s investments at a fixed ratio of
profit.

32. Thank You!
Questions???