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Insurance for an Israeli Apartment Owned From Abroad

Q: Do I have to buy insurance through the bank?

No. The bank can require cover meeting its conditions and naming it as beneficiary, but under Bank of Israel rules you may buy it from any insurer that meets those conditions.

Q: Is earthquake cover included?

Many Israeli residential policies include it, sometimes with a separate deductible, but it is not always automatic. Confirm it is in the policy you buy.

Q: Can a non-resident get life insurance for the mortgage?

Sometimes, depending on age, health and the insurer's rules on foreign residents. If an Israeli insurer declines, ask the bank what alternatives it will accept.

Insurance policy documents for an apartment in Israel

Insurance for an Israeli apartment comes in three layers: structure insurance for the building fabric, contents insurance for what is inside, and landlord cover for liability and loss of rent when the apartment is let. If the purchase is financed by an Israeli bank, the bank will require structure insurance naming it as beneficiary, and usually life insurance on the borrowers, before it releases the loan. A non-resident owner can arrange all of this through an Israeli insurer or agent, but needs to understand what each policy covers, what the bank insists on and what changes when the apartment is rented or left empty.

Structure insurance

Structure insurance covers the physical apartment: walls, floors, fixed installations, plumbing and electrical systems, and often the owner's share of the common property. Standard Israeli policies cover fire, water damage from pipes, natural events and, in most cases, earthquake, which is an important consideration in Israel; earthquake cover may carry its own deductible and may be optional, so check that it is included. The sum insured should reflect the cost of rebuilding, not the market value of the apartment, since the land is not what is being insured. Policies in Israel are issued by insurers supervised by the Capital Market, Insurance and Savings Authority, and the policy wording follows the standard terms the regulator approves for residential policies.

What the mortgage bank requires

A bank holding a mortgage on the apartment has an interest in the structure and in the borrower's ability to repay. In the loan documents it will typically require:

Structure insurance for at least the amount the bank specifies, with the bank named as beneficiary or assignee so that a claim payment goes first to it.
Continuous cover for the life of the loan, with proof of renewal each year.
Life insurance on each borrower for at least the loan balance, assigned to the bank, so the loan is repaid if a borrower dies.
An undertaking to tell the bank if the policy is cancelled or changed.

Banks offer their own insurance arrangements through an associated agency, but Bank of Israel Banking Supervision rules allow the borrower to buy the required cover from any insurer that meets the bank's conditions. Compare quotes; the bank cannot make the loan conditional on buying its own policy. A non-resident borrower may find that life insurance is harder to obtain from an Israeli insurer, since it depends on medical underwriting and residency; raise this early, because without it the bank may not release the funds.

Contents insurance

Contents cover protects furniture, appliances and personal effects against theft, fire and water damage. For a furnished rental it covers the owner's furniture and appliances; the tenant's own belongings are the tenant's to insure. For an apartment used by the owner on visits, contents cover is optional but sensible if the apartment is furnished. Policies usually set conditions on security measures and may limit cover for valuables.

Landlord cover and tenant obligations

When the apartment is let, add third-party liability cover for injury or damage to tenants or neighbours arising from the apartment, and consider loss-of-rent cover for periods when the apartment cannot be occupied after an insured event. The Fair Rental Law 2017 allocates repair duties between landlord and tenant and sets which costs a landlord cannot pass to the tenant; insurance of the structure is the owner's responsibility, and a lease should not try to push that cost onto the tenant without checking the law. The lease can require the tenant to insure their own contents and to hold liability cover.

Empty apartments and condominium cover

Tell the insurer if the apartment will stand empty for an extended period. Many policies restrict or exclude cover, especially for water damage and theft, after the apartment has been unoccupied beyond a stated period, and some require periodic inspections.
Check whether the building committee insures the common property under the Land Law 5729-1969 arrangements for condominiums. If it does, make sure your policy and the building policy do not leave a gap at the boundary between the apartment and the common areas.
If the apartment is in a building undergoing urban renewal works, check with the insurer how the works affect cover and who insures the site.

Arranging it from abroad

Use an Israeli insurance agent who can deal with the insurer in Hebrew and send you the policy and renewal notices.
Ask for the policy summary in English, and confirm the sums insured, deductibles and exclusions in writing.
Set the premium to be paid by direct debit from your Israeli bank account, and diarise the renewal date.
Give the agent and the insurer your property manager's contact details so claims can be inspected without you flying in.
Keep the bank's insurance confirmation letter with your mortgage file.

Common mistakes

Insuring the apartment for its market value, which overinsures the land and may still underinsure rebuilding.
Letting the policy lapse after the first year, which breaches the mortgage terms.
Not declaring that the apartment is rented, which can void a claim.
Leaving the apartment empty for months without telling the insurer.
Assuming the building committee's policy covers the inside of the apartment.

FAQ

Do I have to buy insurance through the bank?