The notion of Sharia Insurance and the difference with Conventional Insurance

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Currently, there are many types and the benefits offered by the insurer, in which each insurance company has a range of features and advantages on each product that they remove it.

But as a candidate for the user, then it’s only natural if we understand and know well the insurance we will select and use. This will help us to get the maximum benefits and advantages over such use.

During the last few years, Sharia insurance be one insurance product that is widely discussed in the community. This insurance is present to meet the interests and wishes of many people who expect the existence of an insurance product are lawful and in accordance with the provisions of the Shariah.

According to the National Council of Sharia, Sharia insurance is an effort for mutual protection and mutual help among a number of people to help, where this is done through investment in the form of asset (tabarru) which gives the pattern of returns to face certain risks through contract (the Alliance) that comply with Shariah.

In the Islamic insurance, put in place a system, in which the participants will grant some or all of the contribution will be used to pay claims if any participants who have experienced a disaster. In other words, it could be said that, in the role of Sharia insurance from insurance companies is just limited to the management of the operations and investments of a number of funds are accepted only.

In indonesia, Islamic insurance is already widely available in a variety of life insurance products as well as health insurance can be obtained easily through private insurance companies.

In the process, Sharia insurance has a lot of advantages and advantages when compared to conventional insurance. This of course makes a fundamental distinction between the two types of insurance.

For example when you want to ask Islamic health insurance from Prudential, Allianz, Sinarmas, or AIA, of course there is some advantage compared to regular health insurance. The following are the differences between Islamic and conventional insurance insurance in General:

Risk Management
Basically, in the Islamic insurance group of people will help each other and please help, mutual guarantee and it works same way raise funds grants (tabarru). So it could be said that risk management is done in the Islamic insurance is using the principle of sharing of risk, where risk is charged/divided to the company and participants of the insurance itself.

Whereas in conventional insurance applies the system of transfer of risk, where risk is transferred/charged by the insured (insurance participants) to the insurance companies that act as the insurer in the insurance agreement as in health insurance, car insurance, or travel insurance.

Management Of The Fund
The management of the funds committed in the Islamic insurance is transparent and are used to bring the maximum benefit to the holder of the insurance policy itself.

In conventional insurance, the insurance company will determine the amount of premium quantity and various other charges intended to generate revenue and profits as big as for the company itself.

The System Of The Treaty
In the Islamic insurance only used the contract grants (tabarru) based on a system of Sharia and certainly lawful. Whereas in conventional insurance contract that do tend to be the same as the purchase agreement.

The Ownership Of The Funds
In accordance with the contract are used, then the Islamic insurance in the insurance fund is jointly owned (all participants of insurance), where the insurance company only acts as the Fund Manager only. This does not apply in conventional insurance, because the premiums paid to the insurance company belongs to the insurance company, which, in this case the insurance company will have full authority against the management and expenditure of insurance.

Profit Sharing
In the Islamic insurance, all profits obtained by companies related to the insurance fund, will be distributed to all participants of the insurance. But will differ from conventional insurance company, in which all the benefits it brings will be a property insurance company.

The Obligation Of Zakat
Shariah-compliant insurance companies require participants to pay the zakat which amount will be adjusted with the amount of the profits obtained by the company. This does not apply in conventional insurance.

Claims and Services
In the Islamic insurance, participants can benefit from the protection of the inpatient stay in a hospital for all family members. Here are applied to the system the use of the card (cashless) and pay all bills incurred.

One insurance policy is used for all family members, so the premiums imposed by Sharia insurance also will be lighter. This does not apply in conventional insurance, where everyone will have their own policies and premium imposed would certainly be higher.

Sharia insurance also allows us to be able to do double claim, so we will still get a claim we ask though we have earned it through our insurance to another.

Supervision
In the Islamic insurance, supervision is carried out strictly and implemented by the National Shariah Board (DSN) formed by direct Assembly of Indonesia Ulema (MUI) and tasked to oversee all forms of implementation of syariah economy in Indonesia, including issuing a fatwa or laws that govern it.
At any financial institution of Sharia, Sharia Supervisory Board required (DPS) who served as Trustees. DPS this is representative of the DSN that is in charge of ensuring the institutions have implemented sharia principles correctly.

DSN this is then tasked to conduct surveillance against all forms of operations that are run in the Islamic insurance, including considering everything form property insured by insurance participants, where it must be are halal and the haram element off. This will be seen from the origin and source of the property as well as the benefits generated by it.

Different is the case with conventional insurance, where the origin of the object insured does not become a problem, as seen by the company are value and premiums would be set out in such insurance agreements.

Investment Instruments
It also became a great differences in Islamic and conventional insurance. In the Islamic insurance, investment can not be done on a variety of business activities that are contrary to Islamic principles and contain elements of unlawful in its activities. Included in these activities are:

Gambling and games that pertained to in gambling. Trade is prohibited according to the Sharia, among others: a trade that is not accompanied by the delivery of goods/services, and commerce with supply/demand. Financial services ribawi, among others: bank-based interest, and interest-based financing company. Buy and sell risk that contain elements of uncertainty (gharar) and/or gambling (maisir).
Produce, distribute, trade and/or provide a variety of goods, such as: nutritional goods or services is unlawful (haram li-dzatihi), goods or services not because nutritional haram (haram li-ghairihi) set by the DSN-MUI. Transaction containing elements of bribery (risywah).

Provisions like this of course does not apply in conventional insurance, because basically in conventional insurance companies will do a variety of investments in a wide range of instruments that are intended to bring in the profit deepest gratitude for the company.

This can be done without using the/consider haram or whether the chosen investment instruments, because basically in conventional insurance fund that managed is actually the company’s funds and does not belong to policyholders insurance, so the company has full authority in the use of those funds, including in the choose the type of investment that will be used.

Funds Forfeited
In some sorts of insurance issued by an insurance company, we know the term “scorched Fund” which is where this happens to unclaimed insurance (e.g. life insurance holders polis not died until protection period ends). But things like this do not apply in the Islamic insurance, because the funds can still be taken even though there is a small part of the tabarru funds.

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