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Sanzida Begum
ID: 17002

Basic principle of Insurance

Insurable Interest
Principle of Indemnity
Principle of Subrogation
Principle of Utmost Good Faith
Proximate cause
Contribution

Difference between Islamic and Conventional

Insurance
Area of differences Premiums
Contract
Investment
Insurer
Policyholder
Access to capital
Board of Directors
Corporate Governance
Accounting
Policy wording

Why Islam does not support Conventional

Insurance
Gharar (Arabic danger) - element of
uncertainty in the subject matter of a contract or
as regards the price of the goods, or any
speculative risk.
Gharar can be characterized as the sale of what
is not present.
Maysir (Arabic gambling): any action aimed
at an easy material gain (without investing work
or capital).

 Riba (Arabic increase, accretion): in a loan

contract, interest on the principal charged by
the lender when providing funds to the
borrower. In the broader sense: any interest in
commercial and financial transactions enabling
one of the parties to achieve material gain at
the expense of the other party, without
providing adequate compensation.

- Insurance encroaches on the rights of

Allah (insuring ones life);
- Risk is traded, not shared;
- Against the principles of mirath;
- Insured has no share in profit of company;
etc.

Operation: General Takaful

Participant enter into contract with the company on
the basis of the principle of Mudaraba as per
"partnership"
The Company collects the Takaful contributions
(insurance premium) from the participants and
manage the various classes of general Takaful fund
The participants shall pay the premium as
"Tabarru". These Takaful contributions are credited
into the "General Takaful Fund" of the company.

 The company will invest the funds. All the profits from the
investment shall be pooled back to the fund.
The company shall pay from the General Takaful Fund
compensation. From this fund, operational costs of General
Takaful Business, required reinsurance premiums are to be
borne.
Reserve for unusual losses is to be built up from this fund.
The surplus (profit) after meeting all these expenses and
required reserve, will be shared between the participants and
the company. However, the participants who had suffered
losses should not have any share of profit as they have been
already compensated out of this fund.

Family Takaful
Pay the agreed amount of installments on a regular basis.
Each installment is divided and credited into two separate
accounts namely "The Participant Account" and the "The
Special Account".
The major portion of the installment amount is credited to
the Participants Account and the rest is credited to Special
Account.
The deposits are paid back to the participants as per terms of
the contract with profit. The amount that is credited to the
Special Account is meant for those participants who will not
be able to pay full installments because of early death.

 The amount credited into these two accounts is

invested as per Shariah and profits are shared between
the Participants and the Company in an agreed ratio.
In the event of surrender of the policy, the incumbent
participant will receive the proportion of his Takaful
installment, which had been credited to Participant
Account together with his share of profits
accumulated up to the date of the surrender. But he
will not be entitled to get any refund from the Special
Account.

 If a participant expires before the maturity of Family Takaful

Scheme, then his or her heirs will be entitled to get the total
amount of the installments deposited in the Participants
Account before his death along with his share of profit credited
into Participants Account.
If a participant is alive until the date of maturity of the Takaful
Scheme, he/she is entitled to get the total amount of Takaful
installments deposited in the Participants Account along with
his share of profit. He will also be entitled to a proportion of
net surplus, if any, which is available in the Special Account as
per last valuation of this account before the maturity date