Takaful is Islamic insurance based on the principles of mutual cooperation and shared responsibility. Participants contribute money into a common pool, and when any member suffers a covered loss, they are compensated from that pool.
Unlike conventional insurance (which involves uncertainty and gambling-like elements prohibited in Islam), Takaful is structured as a cooperative arrangement. Participants help each other — it is not a commercial transaction between insurer and insured.
A Takaful operator manages the fund and charges a Wakalah fee (agency fee) or takes a share of investment profits. Any surplus in the fund is distributed back to participants. The global Takaful market is worth over $30 billion and growing rapidly, especially in Malaysia, Saudi Arabia, and the UAE.