Conventional Car Insurance VS Islamic Car Insurance (Takaful): What's the Difference? -
car insurance takaful

Conventional Car Insurance VS Islamic Car Insurance (Takaful): What’s the Difference?

Where the car insurance is a well-known term to many people who own a car, the car takaful (aka Islamic car insurance) is a term that has grown significantly over the year. Takaful refers to the mutual protection and guarantee. Practically, takaful is referred to the participants that have the mutual contribution to same funds and with the aim to have a mutual indemnity in case of any loss or peril.

Takaful is another name of car insurance and it allows the premium from the policy holder to be used into funds and to support both the parties in case of any mishap or emergency. The idea of takaful is based on the theory that compliance with Sharia or Islamic Law. It is thus a risk transfer agreement that requires an active participation of both participants and the operators.

The main difference between takaful and conventional car insurance is the way risk is managed in both the cases. It also includes the different mode of management of takaful funds. There are differences between the operators and the participant’s relationships as well.

As compared to conventional insurance, takaful does not support any kind of uncertain activities when we speak about the risk assessment. Management of funds through interest or Riba is also not a part of takaful and these are some of the reasons that make takaful stands different from car insurance.

List of Car Takaful Providers in Pakistan:

Number of Companies are offering car takaful services in Pakistan, the list of which is:

  • IGI General Takaful
  • Adamjee Motor Takaful
  • EFU General takaful
  • Jubilee General takaful
  • Pak Kuwait Takaful
  • Pak Qatar General Takaful
  • United General Takaful

List of Car Insurance Companies in Pakistan:

The Difference?

Here are some of the core differences between the car takaful and conventional car insurance services that are offered to the people in Pakistan:

  • The Funding System: The conventional car insurance is based on type of risk transfer management where the risk is removed from the insured vehicle with the help of the premium paid for the policy. While the takaful insurance is based on the mutual benefits of the policy provider and the car holder. This shared funding is also called as a common pool. The manager of the pool is the company that is offering takaful services.


  • Surety: In conventional car insurance there is a high level of uncertainty and this is something not appreciated in Islam as well. This uncertainty is linked to the use of the money you have paid for the premium into the sources that can bring both profit or loss. While in car takaful there is a lesser amount of uncertainty as the money you have paid in terms of the premium will be invested in halal sources of earning money or profit and where the positive results are guaranteed or have clear grounds. It can also be called as a conditional donation for the worthy cause.


  • In conventional car insurance there are more aspects of investment with the amount paid by the car holders in terms of premium but with the expectation that a handsome amount in terms of compensation will be paid in such a case if the loss they are expecting, does not happen and their car does not meet any accident or serious damage, they will lose the amount they have paid in the name or premium. While on the other hand if you are going for a car takaful services, the benefits of the paid premium will not be lost from the insurers or the car owner, in case there is not such bad incident. Rather both parties settle for a predefined setup to share the money once the policy duration expires.


  • In conventional car insurance, any profit earned on the paid premium will be owned by the shareholders, and the policyholder or the owner of the car will not get any return by the end of the day. While we speak about car takaful, the participants there will get a surplus amount will be paid back to them in the name of a relationship of sharing contribution as per decided to be done by the end of the contract.

These are some of the core differences between the conventional car insurance and car takaful services that are available in Pakistan. You can also use the car insurance comparison as well as car takaful comparison tool powered by to have a clear idea of what car insurance service suits your needs the most. These tools will also help you save your time and money and make a handsome decision.

On the whole, there is a clear difference between the car takaful and conventional car insurance including the core idea, the benefits and the principles along with the investment activities that help the user to identify and choose any one of them on the basis of their preferences and needs. One can only make a better decision once they revise their needs and demands and what benefits they are looking to earn with the investment.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top