Islamic Insurance Essay Example | Topics and Well Written Essays - 2500 words

Islamic Insurance - Essay ExampleWhen the insured event doesnt occur the insured person loses the sum invested in the policy and if the amends claims be larger than the contributions then the insurance comp whatever is in deficit. The above leash factors make conventional insurance Haram- prohibited in Islam. However, since safety and security is the basic human need in todays uncertain world, thusly Muslim society needed an alternative to conventional insurance in order to secure their personal line of credit transactions and personal interests. Islamic shariah - decree of conduct is based on Muslims Holy book Quran and the sayings and traditions of the Prophet Mohammed, which preaches br early(a)hood and mutual interest in order to set just and equitable social order in the society. Therefore, Takaful insurance was introduced to minimize the risk by mutual agreement which doesnt exploit the interest of any party. C. TAKAFUL INSURANCE Takaful is an Arabic word, which means joi nt guarantee or mutual co-operative agreement. Tabarru is the basic pillar of Takaful insurance which means charity or chip in, (International Co-operative and Mutual Insurance Federation, 2005). Takaful insurance is based on the principles of Islamic br otherwisehood that promotes common interest and solidarity. Both parties sh be the responsibility with a sincere inclination to help the other in his/her difficult time by paying the defined loss from the defined sum. D. CHARACTERISTICS OF TAKAFUL INSURANCE 1. Both parties trust each other and contribute their money into a common pool. 2. The losses are divided so that the element of gharar -uncertainty is reduced and liabilities of each party under the losses are calculated... This paper explaines why the conventional insurance in not permissible in Islam, defines takaful insurance and further explores the problem by determining the key features of takaful insurance and its differences and similarities with the conventional insur ance.Takaful is an Arabic word, which means joint guarantee or mutual co-operative agreement.Characteristics of takaful insurance are as follows 1.Both parties trust each other and contribute their money into a common pool.2.The losses are divided so that the element of gharar -uncertainty is reduced and liabilities of each party under the losses are calculated according to the Islamic pooling system. 3.The policy should not contain terms and conditions aiming towards getting the benefits at the cost of risking other partys interest.4.Both parties accept to help the other through guaranteed compensation so that uncertainty is removed. 5.The insurance funds are invested in instruments that are interest free.The study concludes that the chances for the growth of the takaful business are very promising. Takaful products are available in many countries which meet the needs of the corporations and individuals. However, the biggest challenge is to overcome the shortage of resources espec ially, human resources, by providing training and information to employees about Islamic financial models and retaining competent employees who can contribute to the growth of takaful industry.