Status of Takaful
Glossary of Financial Terms
Basis and Principles of Takaful
Islamic insurance requires each participant to contribute into a fund that is used to support one another with each participant contributing sufficient amounts to cover expected claims.
The underlying principles of Takaful may be summarised as follows:
- Policyholders co-operate among themselves for their common good.
- Every policyholder pays a part of the contribution as a donation 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 seek to 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."
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