Islamic insurance requires each participant to contribute into a fund that is used to support one another with each participant contributing sufficient amounts to cover expected claims.

The underlying principles of Takaful may be summarised as follows:

* Policyholders co-operate among themselves for their common good.

* Every policyholder pays a part of the contribution as a donation 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 seek to 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."



Source : islamic-banking.com