Appraising the Universal Concepts of Insurance and Takaful: Similarities and Differences

Abstract

Social security is a crucial part in human life, which is consisted pre-arrangements against risky life. Takaful is an essential approach which provides confidence and ethical guidlines in protecting assets. Takaful, is considering Shari’ah principles, also applies the same principles of insurance for its operation even though insurance consists of some prohibited elements in Islam. The objectives of this study are to analyse the governing principles of insurance and takaful and explain how Islam focuses on these principles and ethical aspects in takaful operation from Shariah perspective. The study is designed as documentary research which provides conceptual and theoretical knowledge, and it uses secondary sources such as journal articles, books, reports, as well as main sources of Islamic law. Findings of the study are that principles that are applied in takaful comply with shariah. Similarly, Shari’ah usually does not prohibit general guidelines which are created even in conventional institutions; however, it strictly prohibits the elements which are nocuous to the community. The advantage of takaful is making confidence and truth under religion, which is to be applied in transactions, social life to be free from fear, privation, and poverty. This research supports to takaful researchers and operators to be educated strongly on principles with shariah views and takaful’s importance.

Implementation of Sharia Insurance in providing Sustainable Finansial Protection

“…Takaful is an essential approach which provides confidence and ethical guidlines in protecting assets. Takaful, is considering Shari'ah principles, also applies the same principles of insurance for its operation even though insurance consists of some prohibited elements in Islam [2] Takaful is a system of Islamic insurance based on the principle of mutual cooperation (ta'awun) and donation (tabarru'), where the risk is shared collectively and voluntarily by the group of participants [3]. Sharia insurance, which is based on helping each other for good things and Taqwa, requires all the participants in a big family to protect each other and bear the economic risk among them.…”