DEFINITION of 'Takaful'

A type of 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.


Takaful insurance companies were introduced as an alternative to commercial insurance companies, which go against the riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles, that are outlawed in Sharia.

  1. Pooling Of Interests

    A method of accounting that allows the balance sheets of two ...
  2. Islamic Banking

    A banking system that is based on the principles of Islamic law ...
  3. Financial Cooperative

    A financial institution that is owned and operated by its members. ...
  4. Usury

    The act of lending money at an interest rate that is considered ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Mutualization

    The process of changing a firm's business structure so the owners ...
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    Islamic investments are a unique form of socially responsible investments because Islam makes no division between the spiritual ... Read Full Answer >>
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  4. What risks do I face when investing in the insurance sector?

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  5. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
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