Takaful vs. Conventional Insurance

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