> For the complete documentation index, see [llms.txt](https://docs.takadao.io/tld-whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.takadao.io/tld-whitepaper/part-i-what-is-the-lifedao-life-protection/background/takaful-an-islamic-alternative-to-conventional-insurance/takaful-vs.-conventional-insurance.md).

# Takaful vs. Conventional Insurance

<table data-header-hidden><thead><tr><th width="281"></th><th></th><th></th></tr></thead><tbody><tr><td><br></td><td>Takaful</td><td>Conventional Insurance</td></tr><tr><td>Purpose/Intention</td><td>Mutual aid and risk sharing</td><td>Risk transfer</td></tr><tr><td><p>Operator/</p><p>Company</p></td><td>The Takaful operator manages the funds on behalf of the participants as a group and is paid an operating fee and some incentive on investment returns (if any)</td><td>The relationship between the insurance company and policyholders is on a one-to-one basis. Policyholders are customers. Premiums are revenue for the company</td></tr><tr><td>Insurer v. Insured</td><td>The participants are both the insurer and the insured and bear the risk and reward from insurance activities</td><td>The insurance company is the insurer and bears all the risk and reward from insurance activities. The customer is the insured. </td></tr><tr><td><p>Payment of Contributions/</p><p>Premium</p></td><td>Contributions are paid as partial or full donations</td><td>Premiums are paid as an expense and cost of purchasing an insurance policy</td></tr><tr><td><p>Ownership of Contributions/</p><p>Premiums</p></td><td>Contributions are owned by the participants as a group </td><td>Premiums are owned by the insurance company</td></tr><tr><td><p>Use of Contributions/</p><p>Premiums</p></td><td>Contributions are used to pay claims, direct expenses of the fund, takaful operator fees, and invested for returns</td><td>Premiums are revenue for the insurance company, they are used to pay claims, operating costs and invested for returns</td></tr><tr><td>Treasury Management</td><td>Invests in shariah compliant investment vehicles only</td><td>No restriction on types of investments </td></tr><tr><td>Underwriting Surplus/Loss</td><td>Belongs to the participants</td><td>Belongs to the insurance company</td></tr><tr><td>Investment Returns/Losses</td><td>Belongs to the participants</td><td>Belongs to the insurance company</td></tr></tbody></table>