Principles of Takaful
The principles of Takaful 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." Commercial insurance is strictly not allowed for Muslims as agreed upon by most contemporary scholars because it contains the following elements:
- Al-Gharar (Uncertainty)
- Al-Maisir (Gambling)
- Riba (Interest)
There are three (3) models and several variations on how takaful can be implemented.
- Mudharabah Model
- Wakalah Model
- Combination of both