There are two types of risk or uncertainty: Pure Risk and Speculative Risk. There is always a chance of losing money or not. For instance, fire damage to property. Takaful and insurance risk protection both deal with pure risks. Conversely, speculative risk entails the potential for loss, no loss, or gain. For instance, starting a new business or partaking in horse racing gambling. It is not possible to ensure speculative risks that have a possibility for profit or gain. Takaful schemes use the indemnification principle to make up for losses suffered by Takaful Participants. Takaful only covers pure risks, and claims are only paid out in the case of a loss to pay for property replacement, repairs, or an agreed-upon set amount.

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