What is Takaful?

Takaful: 

The word Takaful is an arabic word which means 'mutual guarantee'. It is a type of Islamic insurance, where members contribute money into a pooling
system in order to guarantee each other against loss or damage. It goes against the riba (interest), al-maisir (gambling), and al-gharar (uncertainty) principles, that are prohibited in Islamic Sharia.
Reference from Quran:
Help one another in al-Birr and in al-Taqwa (virtue, righteousness and piety), but do not help one another in sin and transgression. (Surah Al-Maidah, Verse 2)
Principles of Takaful:
The principles of Takaful are as follows:

1. Policyholders cooperate among themselves for their common good.
2. Policyhoders contributions are considered as donations to the fund (pool)
3. Every policyholder pays his subscription to help those who need assistance.
4. Losses are divided and liabilities spread according to the community pooling system.
5. Uncertainty is eliminated concerning subscription and compensation.
6. It does not derive advantage at the cost of others.

Models of Takaful:
Generally, there are four models of how takaful can be implemented:

1. Mudharabah model (profit-sharing): The shareholders are sharing Profit and Losses with the policyholders.
2. Wakala model: agency fee, received up from the contributions and transferred to shareholders fund;
3. A combination of both:
4. Al Waqf model