takaful

USA

A method of providing insurance in a manner compliant with Sharia. Traditional insurance products are impermissible (or haram) under Sharia because they contravene the gharar principle against uncertainty and speculation. In a takaful transaction, which is based on the Islamic principle of mutual assistance and risk sharing:

• The insured parties establish a fund that is managed by the insurer.

• The insurer invests the funds in Sharia-compliant assets.

• If one of the insured suffers a loss, he is compensated from the fund.