In brief
Takaful is insurance based on mutual help: participants pay contributions into a common fund that compensates those among them who suffer a loss. A company manages the fund for a fee. The International Islamic Fiqh Academy presents it as the lawful alternative to commercial insurance (resolutions 9, 1985, and 200, 2013).
The principle
The Qur’an commands believers to help one another in righteousness and piety (al-Ma’idah 5:2). In takaful, participants do not “sell” their risk to a company: they guarantee one another. Their contributions are treated as donations to the fund, which makes the uncertainty over who will be compensated tolerable.
What sets it apart from commercial insurance
The International Islamic Fiqh Academy ruled that fixed-premium commercial insurance is unlawful because of the major gharar it contains, and proposed cooperative insurance in its place (resolution 9 (9/2), 1985). In 2013 it set out its foundations (resolution 200 (6/21), Riyadh):
- the participants’ fund is kept separate from the accounts of the managing company;
- the company is paid a fee for management (wakalah model) or receives a share of the profits from investing the fund (mudarabah model), but does not keep the underwriting surplus, which goes back to the participants or serves the purposes of the fund;
- the fund’s investments must be compliant;
- if there is a deficit, the company may grant the fund an interest-free loan.
Diyanet, for its part, also accepts commercial insurance (decision 2005/64): see is insurance permissible?.
Where to find it
Takaful is available in the Gulf, Malaysia, Morocco (since 2021-2022), Tunisia, Türkiye (tekâfül) and, to a limited extent, the United Kingdom. See banks and insurers by country.
The verses
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تُحِلُّوا۟ شَعَٰٓئِرَ ٱللَّهِ وَلَا ٱلشَّهْرَ ٱلْحَرَامَ وَلَا ٱلْهَدْىَ وَلَا ٱلْقَلَٰٓئِدَ وَلَآ ءَآمِّينَ ٱلْبَيْتَ ٱلْحَرَامَ يَبْتَغُونَ فَضْلًا مِّن رَّبِّهِمْ وَرِضْوَٰنًا وَإِذَا حَلَلْتُمْ فَٱصْطَادُوا۟ وَلَا يَجْرِمَنَّكُمْ شَنَـَٔانُ قَوْمٍ أَن صَدُّوكُمْ عَنِ ٱلْمَسْجِدِ ٱلْحَرَامِ أَن تَعْتَدُوا۟ وَتَعَاوَنُوا۟ عَلَى ٱلْبِرِّ وَٱلتَّقْوَىٰ وَلَا تَعَاوَنُوا۟ عَلَى ٱلْإِثْمِ وَٱلْعُدْوَٰنِ وَٱتَّقُوا۟ ٱللَّهَ إِنَّ ٱللَّهَ شَدِيدُ ٱلْعِقَابِ ٢
O you who have believed, do not violate the rites of Allāh or [the sanctity of] the sacred month or [neglect the marking of] the sacrificial animals and garlanding [them] or [violate the safety of] those coming to the Sacred House seeking bounty from their Lord and [His] approval. But when you come out of iḥrām, then [you may] hunt. And do not let the hatred of a people for having obstructed you from al-Masjid al-Ḥarām lead you to transgress. And cooperate in righteousness and piety, but do not cooperate in sin and aggression. And fear Allāh; indeed, Allāh is severe in penalty.
Frequently asked questions
Does takaful cost more?
Not necessarily: contributions are calculated in the same way as premiums. The difference lies in the contract and in what happens to the surplus, which goes back to the participants.
Is compulsory insurance permitted if takaful is not available in my country?
Many scholars who forbid commercial insurance accept insurance that is required by law. See the question on insurance.