Takaful is an Arabic word meaning (guaranteeing each other) or (joint guarantee).
The Tabarru' system is the main core of the Takaful system making it free from uncertainty
and gambling. Tabarru' means (donation; gift; contribution.) Each participant that needs
protection must be present with the sincere intention to donate to other participants
faced with difficulties.
Therefore, Islamic insurance exists where each participant contributes into a
fund that is used to support one another with each participant contributing
sufficient amounts 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 INSURANCE ARE AS FOLLOWS:
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.”
