What is Takaful insurance? How does Takaful insurance work? And How is it different from the conventional insurance policies?

The word ‘Takaful’ literally means ‘mutual agreement’ which have been derived from an Arabic word ‘Kafalah’ meaning ‘to take care of’. Takaful insurance is an Islamic concept of insurance. It is a Shariah compliant mutual risk transfer agreement which involves participants and operators rather than sellers and buyers. Takaful insurance covers various products such as life takaful, motor takaful, health takaful…etc.

How does it work?

The takaful system is based on mutuality. A certain amount of money is contributed by the participants forming a collective pool. These contributions are considered as donations forming what is called the Takaful Fund. The amount of contribution that each participant makes is calculated based on the type of coverage they require and their personal circumstances, while the management and distribution of the takaful fund is the responsibility of the takaful operator/provider. And as every human activity is subjected to a risk of loss from unforeseen events and misfortunes, the takaful insurance operator provides suitable compensations to the members in any case of loss or need.

The concept of insurance in Islamic Shariah is based on the principles of mutuality, co-operation, shared responsibility, and joint indemnity. Accordingly, the same applies to the concept of takaful insurance, as the risk or loss is not transferred, rather it is shared by the participants who form a common pool. Also, the surplus belongs to the participants which are returned to them at the end of the accounting period. This concept is unlike the conventional insurance policies giving an edge to the takaful insurance.


Takaful is mainly different from the conventional insurance in the way the risk is assessed and handled, as well as how the takaful fund is managed. In the UAE, the Insurance Authority (IA) has also launched a set of regulations for the governance of the takaful insurance and many companies are already catering to people’s needs following these regulations.

In BankOnUs, we have partnered up with multiple takaful providers in the UAE to help you find exactly what you’re looking for. Compare takaful plans for your car!

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