Investment Income Sharing

Typically, insurance companies look to turn a profit. You pay for a policy. If something goes wrong, the company covers your loss. Lots and lots of people pay into the insurance company's pot. The firm then invests that money, looking to make the pot bigger. Some of the cash gets used to cover losses. Whatever's left over becomes profit.

There's a different model, though...one that has a similar operation, but without the profit part. In particular, it comes up in the Islamic concept of takaful. It's like non-profit insurance (with a bit of religion mixed in).

The takaful structure generally works like an insurance company. A bunch of people pay into a common fund. If one of them suffers a setback covered by the fund, they get some cash to take care of the problem. Meanwhile, the fund is invested in order to make the pot of money get bigger.

The difference from traditional insurance is that there's no overarching company taking a profit. And here's where the investment income sharing comes in.

The term "investment income sharing" applies to the profits earned by investing the funds compiled by the takaful. The added money that comes through investment gets shared among the people who paid into the fund. It's not owned by an insurance company. It's held in trust by the takaful organization for all its members...they each have claim on a share.