“Takaful” is Islamic insurance, where members contribute money into a pooling system in order to guarantee each other against loss or damage. Takaful-branded insurance is based on Sharia, Islamic religious law and explains how it is the responsibility of individuals to cooperate and protect each other. On the other hand commercial insurance/conventional insurance is strictly disallowed for Muslims because it contains Al-Gharar (uncertainty), Al-Maisir (gambling) and Riba (interest).
Takaful is an Arabic word meaning “guaranteeing each other” or joint guarantee. Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not makes profit rather to help each others.
Each participant who needs protection must be participating with an intention to donate to other participants to get away from the difficulties they are facing. Therefore, Islamic insurance introduced where each participant contributes into a fund that is used to support to cover expected claims. The objective of takaful is to pay a defined loss from a defined fund.
Muslim jurists conclude that insurance in Islam should be based on principles of mutuality and cooperation. Encompassing the elements of shared responsibility, joint indemnity, common interest and solidarity.
The Principles of Takaful:
♦ Policyholders cooperate among themselves for their common good.
♦ Every policyholder pays his subscription to help those that need assistance.
♦ Losses are divided and liabilities spread according to the community pooling system.
♦ Uncertainty is eliminated in respect of subscription and compensation.
♦ It does not derive advantage at the cost of others.
Theoretically, Takaful is perceived as cooperative insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits but to uphold the principle of “bear ye one another’s burden.”