Mortgage Life and Property Insurance in Israel
Mortgage Life and Property Insurance in Israel
When an Israeli bank grants a mortgage, it protects itself against two risks: that a borrower dies before the loan is repaid, and that the property is damaged. It does this by requiring mortgage life insurance on the borrowers and property insurance on the structure, both assigned in favor of the bank. For many borrowers, these policies are arranged quickly through the bank at the signing stage. Yet the borrower is generally free to buy the policies from another insurer, provided the cover meets the bank's conditions. For Americans, age, health history and residence abroad can all affect the options. This guide explains how the two policies work and how to approach them.
Why Banks Require These Policies
The bank's security for the loan is the property itself. Structure insurance keeps that security intact if the building is damaged, while life insurance ensures that the loan can be repaid if a borrower passes away. Without both in place and assigned to the bank, the loan funds are generally not released.
How Mortgage Life Insurance Works
Mortgage life insurance is typically a decreasing cover that follows the outstanding loan balance. Premiums depend on factors such as age, health, smoking status and the size and term of the loan. Borrowers usually complete a health declaration, and some may be asked for medical records or examinations.
If there are two borrowers, each is usually insured for their share or for the full amount, depending on the arrangement. Understand which structure you are buying.
Structure Insurance for the Mortgage
The bank requires the building structure to be insured for at least its reconstruction value. For apartments, this means your unit and your share of common property. The mortgage structure policy does not usually cover contents or liability, so many owners add those separately.
Earthquake cover is often part of the structure policy, and the deductible for earthquake damage deserves attention.
Buying Outside the Bank
Israeli rules allow borrowers to purchase these policies from an insurer of their choice rather than through the bank's own arrangement, as long as the cover satisfies the bank's requirements and is assigned to it. Comparing offers can produce meaningful differences in cost over the life of the loan.
A licensed insurance agent can obtain quotes and handle the assignment paperwork with the bank.
Confirm the bank's minimum requirements in writing
Compare premiums and how they change over time
Check exclusions and the claims process
Make sure the assignment to the bank is registered
Special Considerations for Americans
Insurers may ask about residence abroad, frequent travel and medical history recorded in the United States. Answer the health declaration fully and accurately, since incomplete disclosure can put a future claim at risk.
If you already hold life insurance in the United States, it will not normally replace the Israeli mortgage policy, because the bank requires a policy assigned in its favor. Discuss with a licensed advisor whether your overall coverage remains balanced.
Reviewing the Policies Over Time
Premiums for life cover can rise with age, and your needs change as the loan is repaid. Many borrowers review the policies every few years and switch insurers when better terms are available. Before cancelling an existing policy, make sure the new one has been approved by the bank and assigned in its favor, so there is never a gap in cover that could put the loan in breach. If you refinance, the policies must be updated or replaced to match the new loan.
Professional Guidance
A licensed Israeli insurance agent, your mortgage advisor and your Israeli lawyer can together make sure the policies are compliant and in place on time. Questions about how premiums relate to rental income or US tax should go to an Israeli tax advisor and your US CPA. We do not sell insurance or give tax advice.
Frequently asked questions
Can I refuse the bank's insurance offer?
Generally you can choose another insurer, provided the policy meets the bank's conditions and is assigned to the bank. The bank will review the policy before releasing funds.
What if I have a health condition?
Insurers assess each case, and some may apply a higher premium or exclusions. A licensed agent can approach several insurers to find suitable cover.
Do both spouses need life insurance?
If both are borrowers, the bank usually requires cover for each. The exact structure depends on the loan and should be clarified with the bank.
Is the structure policy enough to protect my home?
It protects the bank's security. Most owners also want contents and third-party liability cover, which usually require additional policies.
Elkayam Group
Kobi Elkayam Real Estate Ltd, the company behind the Elkayam Group name, is based on Rival Street 37 in Tel Aviv. Three generations after its family started out in industry in the forties, it works in development, urban renewal, TAMA 38 and pinui-binui, and handles combination and complex deals together with partner companies that can provide guarantees. Our Hebrew, English and French speaking team can introduce American borrowers to experienced local professionals.
Contact us to connect with mortgage and insurance professionals who work with American clients.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv