Difference between takaful and insurance

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Takaful sector and insurance sector both are selling same product but business model is different. Insurance sector sells the policy or product. 


On the other hand, takaful is just taking  donation from you. This donation is collected in a pool form. When any incident happens, amount from pool is reimburse to victim or policyholder. Remaining amount is either distributed back to other members or it's remain in a pool. Takaful company only charges fee to operate this pool. Whereas insurance company does not distribute the remaining amount as they take it as own wealth after paying claim amount. 


Takaful invests this pool money in halal businesses. Insurance company is not bound to invest in halal businesses.

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