Takaful: understanding Islamic insurance and its differences
AmanaFi team · Updated · 1 min read
In takaful, participants pay contributions into a common fund that compensates those among them who suffer a loss. The idea is mutual solidarity, as opposed to a contract where you pay a premium to transfer risk to a for-profit insurer.
The principle
Contributions are paid as a donation to a participants' fund. Compensation is paid by this fund, and any surplus may return to participants or serve as a reserve.
- An operator manages the fund for a declared fee.
- Funds are placed in lawful assets.
- A compliance board oversees practices.
What motivates the difference
Jurists criticise conventional commercial insurance for a contract with great uncertainty and unequal sums paid and received. Takaful seeks to answer these objections with solidarity and transparency.
Questions to ask
For a given product, ask how surplus is treated, who manages the fund and at what cost, where funds are placed, which board validates the product and what the guarantees are. Compulsory insurance, such as car insurance, remains required by law whatever the type of contract.
Frequently asked
Should I give up all insurance if takaful is not available?
Scholars' opinions often allow insurance in case of need or legal obligation. Ask a qualified person for your case.
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