Takaful


Takaful

An insurance structure compatible with Islamic law. According to most Muslim jurists, conventional insurance is disallowed, in part because it requires the insurer to gamble on the likelihood of an insured event's occurrence. This uncertainty is not permitted under the sharia.

Under a takaful, subscribers pay a certain amount, which is deposited into a pool of liquidity with other subscribers' contributions. Insured losses are paid out of that pool. In effect, a takaful is a mutual aid society in which the aim is not profit. However, a company may invest the pool of liquidity in sharia-compliant instruments and may keep a management fee. Takafuls have existed in one form or another for most of the history of Islam.