The philosophical foundation of takaful can be located in Islamic principles such as co-operation, responsibility, mutual protection within the framework of Islamic financial principles.
Due to such principles, takaful is defined as a co-operative or mutual insurance, because members of a takaful company join in contributing a certain sum of money as their subscription to a common pool; losses are divided and liabilities spread.
Takaful can be structured as either a mudaraba (profit-sharing) model, a wakala (agency agreement) model, or a combination of both. The financing of takaful funds are subject to Sharia compliancy. In contrast to the developments in Islamic finance, the takaful industry has not shown similar developments, due to the slower take-up in insurance in the Muslim world.