The word Takaful stands for shared responsibility, shared guarantee, collective assurance and mutual undertakings. In Takaful, there are usually four parties involved: the participant, the operator, the insured and the beneficiary. The nature of Takaful is that in a society, anybody who has legal capacity may contribute an amount of money to a mutual cooperative fund. Thus, those who contribute to the mutual fund are known as participants, while those who are among the participants who face a risk and are assisted by the fund are known as the insured. Those who actually benefit from the fund are known as the beneficiaries of a cooperative fund. The monetary contribution made by the participants to the fund is known as the mutual contribution. The fund is managed by a registered or licensed entity as a corporation known as a Takaful operator. The operator binds himself bilaterally to manage the fund according to Shari’ah principles, and also to provide reasonable financial security against loss or damage as a result of a well-defined risk.
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