Is insurance mandatory in Israel for a mortgage?

Yes, insurance is mandatory when taking out a mortgage in Israel. This includes two types of insurance:

  • Life Insurance – Israeli citizens are generally required to obtain a life insurance policy for the mortgage amount, naming the bank as the beneficiary. This ensures that if the borrower passes away, the outstanding loan balance is repaid, protecting both the lender and the borrower’s family. Without life insurance, the bank typically will not approve a mortgage, as it reduces the risk of unpaid debt.
  • Property Insurance – This covers potential damage to the home due to fire, natural disasters, or other unforeseen events, ensuring the property retains its value.

Both types of insurance must be arranged and approved before the mortgage is finalized. While banks may suggest insurers they work with, borrowers can choose their provider if the policy meets the bank’s requirements. Comparing different options can help secure the best coverage at competitive rates.

Exceptions to the life insurance requirement

Although life insurance is generally mandatory, banks may waive this requirement in rare cases, such as:

  • High Net Worth Borrowers – If the borrower has significant assets, the bank may consider their financial situation sufficient to cover the loan without life insurance.
  • Low Loan-to-Value Ratio (LTV) – If the mortgage amount is relatively low compared to the property’s value or the borrower’s financial standing, the bank may be more flexible.
  • Elderly Borrowers or Health Issues – If a borrower is elderly or has a serious medical condition that makes life insurance prohibitively expensive or unavailable, the bank may agree to other risk mitigation measures, such as additional collateral or a higher interest rate.
  • Corporate or Institutional Borrowers – If a company takes out a mortgage rather than an individual, life insurance may not be required, as the risk is assessed differently.
  • Non-Israelis who have life insurance abroad may be able, under certain circumstances, to obtain a waiver.

Even if life insurance is waived, property insurance remains mandatory. If you believe you may qualify for an exemption from life insurance, it’s best to discuss your situation directly with the bank and explore alternative arrangements they may accept.

This guide is intended to provide the reader with general information and not to serve as legal or other professional advice. Readers are advised to obtain advice from qualified professionals before entering into any real estate transaction.

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