USAA method of providing insurance in a manner compliant with Sharia. Traditional insurance products are impermissible (or haram) under Sharia because they contravene the gharar principle against uncertainty and speculation. In a takaful transaction, which is based on the Islamic principle of mutual assistance and risk sharing:• The insured parties establish a fund that is managed by the insurer.• The insurer invests the funds in Sharia-compliant assets.• If one of the insured suffers a loss, he is compensated from the fund.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
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