Takaful Glossary


  1. Aqd: Agreement, contract.
  2. Aqd Sahih: A legal contract.
  3. Aqd-e-Tabarru: Contract of donation/contribution/gift etc.
  4. Ahkaam : Plural of Hukum, rules, provisions and laws including Allah’s commands/norms/ values for individual believer.
  5. Amana / Aqidah: Faith and belief.
  6. Aqilah: People who have ethnical relationship or rela­tionship of cooperation and help with an unin­tentional killer. They are legally obliged to bear blood money along with the killer.
  7. Ameen : Trustee.
  8. Bai : Sale.
  9. BancaTakaful : Synergizing Takaful products with the products of Islamic banks.
  10. Contribution : An amount paid into a Takaful Fund by a participant. This amount entitles him/her to membership of the Fund and the benefits associated thereto.
  11. Daman al-amal / Dhaman al-amal: Liability underlying a partnership formed on the ba­sis of labour, where the partner is liable for performing the contract or completing the work accepted by either partner.
  12. Daman al-maal: Liability for the debts of the partnership; the usual form of liability underlying all partnerships, especially one formed based on wealth.
  13. Daar ul-harb: Enemy territory not under the jurisdiction of a Muslim state.
  14. Daar ul-Islam: Area under the jurisdiction of the Muslim state.
  15. Diyat : Blood wit, blood money, a monetary compensation against unjustified manslaughter.
  16. Fadhal: Bounties of God
  17. Faqeeh / Faqih: Jurist; an Islamic scholar who can give an authoritative legal opinion or judgment.
  18. Fiqh: Islamic jurisprudence; it covers all aspects of life; religious, political, social or economic. In addition to religious observances (prayers, fasting, zakat and pilgrimage), it covers family law, inheritance, social obligations, commerce, criminal law, constitutional law and international relations, including war. The whole corpus of fiqh is based primarily on the Quran and the Sunnah and secondarily on Ijma and Ijtihad.
  19. Fatwa / Fatwah: A religious decree; a legal verdict given on a religious basis. The sources on which a fatwa is based are the Holy Quran, Sahih Bukhari and Muslim, and all other authenticated Ahadeeth. Plural: Fatawa.
  20. Falah: Success, victory, achievement.
  21. Faqr: Poverty.
  22. Fidyah: Compensation.
  23. Gharar: Uncertainty, hazard, chance or risk, ambiguity and uncertainty in transactions. Technically, the sale of something which is not present at hand; or the sale of something where the consequences or outcome is not known. It can also be a sale involving risk or hazard in which one does not know whether it will come to be or not, such as fish in water or a bird in the air; or an event where assurance or non-assurance is subject to chance and thus not known to parties of a transaction. Can also mean uncertainty or a hazard that is likely to lead to a dispute in a contract.
  24. Hadith: A statement attributed to Prophet Muhammad (PBUH). Hadith texts provide a record of the Sunnah, or guidance by the Prophet (PBUH) (including what he did, what he explicitly said, and what he implicitly permitted by his silence).
  25. Hadith-Qudsi: A saying of ALLAH (SWT) as narrated by Prophet Muhammad (PBUH) that is not a part of the Holy Quran.
  26. Halaal: Permissible, that which is lawful according to the Shariah.
  27. Haraam: Prohibited, that which is forbidden by the Shariah.
  28. Hibah: Gift.
  29. Hudood: The boundary between what is Halaal (lawful) and what is Haraam (unlawful) set by ALLAH (SWT). Whoever transgresses these limits may be punished or forgiven by ALLAH (SWT).
  30. Insurance (Conventional Insurance): Risk transfer mechanism, a way to provide security and/or compensation for what is valuable in the event of loss, damage, or destruction, based on the principle of risk-taking and speculation.
  31. Insurable Interest: Insurable Interest means that the insured must bear a legal relationship to the subject matter of the concerned insurance cover and he should stand to benefit by the safety of the property, rights, interests and lose by any loss, damage, injury or creation of liability. In other words, an insurable interest is of such a nature that the possessor would suffer financial loss on the occurrence of an insured peril.
  32. Indemnity: The insurance contract is one of indemnity. That is, it will make good a loss or damage in such a manner that financially the insured is neither better off nor worse off as a result of the loss. In other words, the insured is placed in the same position financially, as far as possible, as he occupied immediately before the loss. In effect, this principle aims to prevent the insured from making a profit out of his loss or gaining any benefit or advantage out of insurance.
  33. Ijara/ijarah Lit: letting on lease. It refers to a mode of financing adopted by Islamic banks. It is an arrangement under which an Islamic bank leases equipment, a building or other facility to a client against an agreed rental. The rent is so fixed that the bank gets back its original investment plus a profit on it.
  34. Ijma: Consensus of opinion of Muslim jurists on a specific matter; consensus of the jurists on any issues of fiqh after the death of the Prophet (PBUH).
  35. Ijma’ sukuti: Consensus where some jurists give tacit approval to the rule pronounced by others.
  36. Ijtehad / Ijtihad: Lit: effort, exertion, industry, diligence. Technically, endeavour of a jurist to derive or formulate a rule of law on the basis of evidence found in the sources; scholarly effort through which a jurist/scholar derives Islamic law on the basis of Quran and Sunnah.
  37. Iqta: Granting of ownership or usufruct rights over state land by the state to individuals in recogni­tion of their services for the sake of Islam.
  38. Ja’iz: Permissible; permissible contract.
  39. Kafala: To guarantee, to help, to take care of one another’s needs.
  40. Kafil: Surety, person providing the surety, guarantor.
  41. Maysir: Also known as Qimaar; technically, Maysir refers to a situation where there is a chance of total loss to any one party in a contract where the cost and profit is disclosed to the buyer. It is a consequence of gharar (uncertainty).
  42. Murabahah: Permissible trade transaction.
  43. Makrooh / Makruh: Abominable; reprehensible; disapproved of, but not out-rightly prohibited by ALLAH (SWT).
  44. Maal: wealth.
  45. Manafi’: Plural of manfaah (benefits; usufruct; profits; utility).
  46. Mudaraba /mudarabah: The term refers to a form of business contract in which one party brings capital and the other personal effort. The proportionate share in profit is determined by mutual agreement. But the loss, if any, is borne only by the owner of the capital, in which case the entrepreneur gets nothing for his labour.
  47. Mudarabah model: The surplus is shared between the participants and the Takaful operator. The sharing of such profit (surplus) may be in the ratio 5:5, 6:4 etc. as mutually agreed between the contracting parties. Generally, these risk-sharing arrangements allow the Takaful operator to share in the underwriting results from operations as well as the favourable performance returns on invested premiums.
  48. Mudarib muamalah (t): In a mudaraba contract, the person or party who acts as entrepreneur.
  49. Mudarib / Mudharib: A working partner; the partner who provides entrepreneur ship and management in a mudarabah agreement as distinct from the sahib al-maal who provides the finance.
  50. Mufti: One who passes verdicts regarding Islamic jurisprudence.
  51. Muhaddith: A scholar of Ahadeeth. Plural: Muhaditheen.
  52. Muamalah : Commercial transaction.
  53. Mutawalli : Administrator.
  54. Niyyah: Intention.
  55. Nafs : Self, life.
  56. Participant (Policy Holder): Person(s)/organisation(s) who deposit by way of Tabarru (voluntary contribution) in the Waqf fund and become(s) a member of the fund and is/are therefore entitled to benefit from the Waqf i.e. receive claims, sharing in surplus, etc.
  57. Participants’ Takaful Fund (PTF): Also known as Waqf Fund, created by the Tabarruaat (voluntary contributions) of Participants, which provides financial support at the occurrence of pre-defined losses.
  58. Proximate Cause: Proximate cause can be defined as "The active efficient cause that sets in motion a chain of events which bring about a result, without the intervention of any new force started and working actively from a new independent source."
  59. Qimaar : Also known as Maysir; technically, this refers to a chance of total loss to one party in a commutative agreement.
  60. Qard al-Hassan: Interest free loans.
  61. Qiyas : Analogy; legal reasoning.
  62. Riba: Riba literally means increase, addition, expansion or growth. There are two types of Riba in conventional Insurance;Direct Riba – the excess on one side in the exchange between the amount of premium and the insured sum. Insurance is the sale of money for money, of a greater or lesser amount, with a delay in one of the payments.Indirect Riba – the interest earned on interest-based investments. Riba exists in commercial insurance from the profits earned through investments of the premiums/funds in interest-bearing financial instruments such as stocks, bonds, and savings accounts, an unknown part of which is then used for the payment of claims to the policy holders.
  63. ReTakaful : Shariah-compliant reinsurance cover provided to Takaful companies on the basis of Mudaraba and Wakalah .
  64. Ra’s-ul-maal : Takaful contributions/ premium/ installments.
  65. Rabb al-maal: investor; owner of capital; a person who invests in Mudarabah / Musharkah.
  66. Rabb-us-salaam: Buyer.
  67. Subrogation: Subrogation refers to the transfer of rights and remedies of the insured to the insurer who has indemnified the insured in respect of the loss.
  68. Surplus sharing: If at the end of the year there is a surplus in the Waqf Fund, such surplus may be distributed to the Participants as Takaful Operator acts only as the Wakeel of the Waqf Fund and has no right over the surplus amount. That surplus is distributed among the participants proportionately after taking into account any claim benefits already availed.
  69. Sadaqah : Charity.
  70. Sadaqaat Jariah : A form of charity the reward of which continues even after a person’s death.
  71. Shariah : Islamic law.
  72. Sak: Plural. Sukuk; Investment sukuk are certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or special investment activity; However, this is true after receipt of the value of the sukuk, the closing of subscription and the deployment of funds received for the purpose for which the sukuks were issued.
  73. Surah: A chapter of the Quran. There are 114 surahs of varying lengths in the Quran.
  74. Sharikah : Partnership.
  75. Takaful : An Islamic alternative to a conventional insurance programme based upon a Shariah compliant, approved concept founded on the principles of mutual cooperation, solidarity and brotherhood.
  76. Takaful Operator: An organization/company that acts as an operator/manager of Takaful fund.
  77. Ta’awun: Mutual assistance.
  78. Tabarruaat : Plural of Tabarru: Meaning donation, contribution, gift.
  79. Tawakkul : Putting trust in ALLAH (SWT), dependence on ALLAH (SWT).
  80. Thawab : Reward.
  81. Taqwa: Piety, Purity.
  82. Underwriting: The procedure of risk assessment and placement.
  83. Utmost Good Faith: It is a requirement of the law that in all contracts, good faith shall be observed. By good faith is meant absence of fraud or deceit. At law, a commercial contract will be a nullity if one of the parties has committed breach of trust, resulting in fraud or deceit.
  84. Ulama: Islamic scholars, jurists, academicians.
  85. Ummah : Islamic universal community or Nation.
  86. Uqud : Plural of Aqd; contract.
  87. Uqud al-ishtirak : Profit sharing contracts.
  88. Uqud al-muawadhat : Deferred contracts of exchange.
  89. Wakala Model : In this Takaful model, cooperative risk sharing occurs among participants whereas the Takaful operator earns a fee for services (as a Wakeel or Agent) and does not participate or share in any underwriting results as these belong to participants as surplus or deficit. Under the Wakala model, the operator may also charge a fund management fee and performance incentive fee.
  90. Wakala plus Waqf Model: It is a Wakala model with a separate legal entity of WAQF in-between. The relationship of the participants and the operator is directly with the WAQF fund. The operator is the ‘Wakeel’ of the fund and the participants pay contribution to the WAQF fund by way of Tabarru. The contributions received would also be a part of this fund. The combined amount will be used for investment and the profits earned would again be deposited into the same fund. This mechanism eliminates the issue of Gharar. Losses to the participant are paid by the Company from the same fund. Operational expenses that are incurred for providing Takaful services are also met from the same fund.
  91. Wakil: Agent.
  92. Wali: Guardian.
  93. Waqf Fund: Also known as Participants Takaful Fund, created by the Tabarruaat (voluntary donations/charity) of Participants, which provides financial support at the occurrence of certain losses.
  94. Wadiah: Deposit.
  95. Zakah / Zakat: Compulsory levy on every Muslim who has wealth greater than the amount of Nisaab. The amount payable by a Muslim on his net worth as a part of his religious obligations, mainly for the benefit of the poor and the needy.
  96. Zar: Wealth.