5 Benefits of Sharia Life Insurance
Sharia life insurance offers many benefits, making it an option for many people, especially those who want to obtain insurance in line with the teachings of Islam. Sharia Insurance prioritizes Islamic Sharia-based principles and protects members from usury elements.
Read this article to learn more about what sharia insurance is, from its meaning to its benefits. Check out the full explanation below!
What's Sharia Insurance?
Sharia life insurance is an insurance scheme based on Islamic sharia principles. In this type of life insurance, sharia principles apply to all business operations, ranging from collections to cash management to profit distribution. Sharia insurance aims to avoid usury and speculation in money management as well as provide better protection to its members and citizens.
How Does Sharia Life Insurance Work?
The structure of sharia life insurance differs from traditional insurance, which usually uses shareholder funds for investment. Sharia life insurance operates on the principle of donation or mutual aid between policyholders. Insured persons pay premiums and contributions to help other insured persons who experience disasters and losses.
Shariah-compliant life insurers do not rely solely on contributions to make a profit. They also invest their funds in Shariah-compliant investment products such as stocks, bonds, and real estate. Profits from this investment are shared between the participants and the insurance company.
5 Benefits of Sharia Life Insurance Compared to Traditional Insurance
In the followings below are 5 benefits of sharia life insurance that you should know about:
1. No Usury is Included
Unlike traditional insurance, which is regarded as usury, sharia life insurance does not include usury or interest behavior. In Islamic life insurance, the premium paid by the member is only the premium to pay for the risk insured.
In the absence of risk, any contributions paid will not be returned to the participant. Shariah life insurance does not include interest and is compliant with Islamic law principles.
2. Offer Better Protection
Sharia life insurance offers better protection than traditional insurance. Because Sharia life insurance is based on the principle of helping each other and helping each other through donations, A Shariah-compliant life insurer not only pays the claims of its members but also provides advice and support to them when risks arise.
3. Prioritize Participants' Interests
Sharia life insurance prioritizes the interests of its members compared to traditional insurance. Shariah life insurance requires the insurer to manage the participant's money carefully and transparently.
A Shariah-compliant life insurer must also provide clear and understandable information about the insurance products offered to members and potential members.
4. Existence of Sustainability Principles
Sharia life insurance has sustainability principles. Shariah-compliant life insurance companies focus not only on short-term profits but also on long-term business and environmental sustainability. Therefore, Islamic life insurance companies are more likely to invest in sustainable and environmentally friendly Islamic products.
5. Greater Profit Potential
Sharia life insurance has a higher earning potential compared to traditional insurance. This is because Islamic life insurance companies are investing in Islamic products that have greater potential than traditional products. Profits from this investment are also shared between the participants and the insurance company.
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