Takaful mitigates the problematic elements of gharar, maysir, and riba and is Shariah-compatible because it is founded on the principle of collaboration rather than sale or exchange. In contrast, traditional insurance requires policyholders to pay premiums in exchange for protection from disaster. In the event of a catastrophe, the insured will be covered. If such a catastrophe does not materialize, the policyholder will forfeit the premium to the insurance provider.

However, by making a contribution to the Takaful fund, you and the other members (participants) of the fund have agreed to support one another financially in the event that one of the fund’s members experiences a catastrophe or disaster. Furthermore, Takaful Fund does not use any interest-based instruments when investing your donation in accordance with Shariah. Additionally, any surplus will be redistributed to the Participants.

The Takaful Company therefore only manages this pool (for a fee) for the benefit of the members/participants.