This is the difference between Sharia and Conventional insurance

Currently, there are many types and benefits offered by insurance, where every insurance company has various features and advantages in each product they spend. But as a prospective user, it is reasonable if we understand and know with good insurance that we will choose and use. This will help us to get maximum benefit and benefit for the usage.

Over the past few years, Takaful has become one of the most widely discussed insurance products in the society. This insurance is present to meet the interests and desires of many people who expect a kosher insurance products and in accordance with the provisions of sharia.
According to the National Sharia Council, Takaful is an effort to protect each other and help one another among people, where it is done through an asset investment (tabarru) that provides a pattern of return to face certain risks through appropriate contracts With sharia. In Takaful Insurance, a system applies, in which the participant will grant a part or all of the contributions that will be used to pay the claim if there are participants who experienced the disaster. In other words, it can be said that, in the Takaful insurance, the role of the insurance company is limited to the operational and investment management of a number of funds received only.

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In its development, Takaful insurance has many advantages and advantages when compared with conventional insurance. This, of course, makes a fundamental difference between the two types of insurance. The following are the differences between Takaful and conventional insurance:

Risk Management
Basically, in Takaful Insurance a group of people will help each other and help each other, mutual guarantee and work together by collecting grant funds (tabarru). That way it can be said that risk management is done in Takaful is using the principle of sharing of risk, where the risk is charged/divided to the company and the participant of the insurance itself.

While in conventional insurance apply the system of transfer of risk, in which the risk transferred /charged by the insured (the insurer) to the insurance company that acts as the insurer in the insurance agreement.

Fund Management
Fund management undertaken in the Takaful insurance is transparent and is used as much as possible to bring benefits to the insurance policyholders themselves.

In a conventional insurance, the insurance company will determine a number of premiums and various other costs aimed at generating revenue and profits as much as possible for the company itself.

System of Agreement
Within Takaful Insurance, only the grant contract (tabarru) is based on the sharia system and is ensured to be halal. While in conventional insurance akad done tend to be same with a sale and purchase agreement.

Ownership of Funds
In accordance with the contract that is used, then in the Takaful insurance fund is a joint property (all participants of insurance), where the insurance company only acts as a fund manager only. This does not apply to conventional insurance since the premium paid to the insurer belongs to the insurer, in which case the insurance company will have full authority over the management and allocation of insurance funds.

Distribution of Profits
Within Takaful, all profits earned by the company related to the insurance fund will be distributed to all participants. But it will be different with conventional insurance companies, where all the profits earned will be the property of the insurance company.

Obligation of Zakat
Islamic insurance companies require participants to pay zakat whose amount will be adjusted to a number of profits earned by the company. This is not true in conventional insurance.

Claims and Services
Within Takaful Insurance, participants can benefit from the protection of hospitalization costs for all family members. Here the system applies the use of the card (cashless) and pays all bills arising.

One insurance policy is used for all family members, so the premiums imposed by Takaful insurance will also be lighter. This is not true in conventional insurance, where everyone will have their own policies and the premiums charged will be higher.

Sharia insurance also allows us to double claim, so we will still get the claim that we submitted even though we have got it through our other insurance.

Investment Instruments
It also becomes a big difference in sharia and conventional insurance. In Takaful insurance, investments can not be made in various business activities that are contrary to the principles of sharia and contain elements of Haram in its activities. Included in this activity are:

  1. Thirds and games are classified into gambling. Trade prohibited by sharia, among others: trade not accompanied by the delivery of goods/services, and trade with bogus supply/demand. Ribawi financial services, among others: interest-based banks, and interest-based financing companies. Buy and sell risks that contain elements of uncertainty (gharar) and/or gambling (maisir).
  2.  Produce, distribute, trade and/or supply any goods, such as: haram li-dzatihi goods, or goods or services forbidden by substance (haram li-ghairihi) stipulated by DSN-MUI. Conducting transactions that contain elements of bribery (risywah).

Such provisions, of course, do not apply to conventional insurance, because basically in conventional insurance companies will conduct various investments in a variety of instruments intended to bring profits as much as possible for the company. This can be done without using / considering the haram or not the selected investment instrument, because basically in the conventional insurance fund that dikelola is actually funds owned by the company and not the owner of the insurance policy, so the company has full authority in the use of these funds, Including in choosing the type of investment to be used.

Hanged funds
In some types of insurance issued by a conventional insurance company, we recognize the term "charred fund" which is the case with unclaimed insurance (such as life insurance that the policyholder does not die until the coverage period ends). But such a thing does not apply in Takaful insurance because the funds can still be taken even though there is a small part of the tabarru souvenir.

Consider Good Insurance to Be Used
Basically, sharia and conventional insurance have advantages and disadvantages of each, where we as a potential user must understand and can consider well which insurance is most appropriate for us to use. Adjust our needs with the type of insurance we use, so we can get maximum benefits and benefits for the use.