Insurance and Takaful: A Comparative Study in the Light of Shariah

انشورنس اور تکافل ، میزان شریعت میں ایک تقابلی جائزہ

Abstract

The modern issue of insurance has emerged as one of the key challenges for Muslims, as it did not exist in the earlier eras of Islamic jurisprudence. Insurance involves a company providing coverage for specified items like vehicles, businesses, goods, or health, agreeing to compensate the policyholder in case of loss or damage. Due to its novelty, scholars have extensively debated its permissibility in light of Islamic principles. According to our research, insurance is generally deemed impermissible in Islam due to its association with usury (interest) and other practices that contradict Shariah. Some scholars have proposed Takaful as an Islamic alternative to conventional insurance. Takaful is based on mutual assistance and cooperation among participants, but this paper argues that the model of Takaful, as currently practiced, lacks the true spirit of cooperation. Many of its elements resemble commercial exchange, which scholars classify under trade laws rather than charitable cooperation. In conclusion, the paper suggests that for a truly Islamic alternative, a Takaful system must be rooted in the concepts of waqf (endowment) and pure cooperation, ensuring that losses within society can be addressed without resorting to trade-like mechanisms. Additionally, the current form of Takaful requires significant reforms to align more closely with Islamic principles. This abstract summarizes the key findings and the scholarly debate on the permissibility and alternatives to insurance in Islamic finance.