Mortgage Insurance: Your Rights Against the Bank

When you sign a mashkanta (mortgage), the bank almost always brings up the insurance linked to the loan. Many borrowers sign at the counter without knowing they have specific rights. Here are those that Kol Zchut and the Bank of Israel point out.

What the bank can require

The bank can require two insurance policies in order to grant you the loan: life insurance and insurance of the structure of the property. Life insurance guarantees the bank that it recovers the remaining balance if you die before the end of the loan. Structure insurance covers the property in the event of major damage (fire, earthquake, natural damage) that would reduce the value of what the bank is financing.

Right no. 1: choose who insures you

You can buy one or the other, or both, from the bank's insurance agency or from a private insurer (company, agency or agent). The bank must tell you this in the file. If you go through a private insurer, give the policy to the bank quickly. Within 14 days, the bank replies: it either accepts the policy, or refuses and insures you itself.

Right no. 2: no compulsory insurance below 30,000 shekels

The bank cannot impose life insurance and structure insurance for a loan of 30,000 shekels or less, nor when the remaining balance is below 30,000 shekels. If the balance is below this threshold, or will fall below it within the year, the bank must inform you that you can cancel. It also cannot require it if the balance is lower than the value of the land.

Right no. 3: change insurer at any time, at no cost

You can move from one insurer to another, from the bank's agency to a private insurer or between two private insurers, at any time and without commission, as long as the policy terms remain the same. Be careful: a new insurer may ask you for a new health declaration. If your health has worsened, the cost may go up.

Right no. 4: information every year

If you are insured through the bank's agency, you receive a document every year showing the amounts paid for each insurance (useful for tax), the level of cover, and a statement that you can cancel at no cost if you present an equivalent policy from a private insurer.

What the bank's insurance does not cover

The structure insurance offered by the bank covers neither the contents of the flat, nor third-party liability (for example a fire that damages the neighbour's flat). A private insurer can add them. Another practical point: if you have a contents policy with a private insurer and structure cover with the bank's agency, a claim affecting both will oblige you to deal with two insurers and pay two excesses.

A little-known tax advantage

You can obtain a refund of 25% of the premiums paid for life insurance (at the bank's agency as well as with a private insurer) by filing the annual tax return.

Steps that can bring the price down

An early repayment of part of the loan, a refinancing or a change in your health situation (stopping smoking, for example) can reduce the cost. Check your statements and your policy from time to time. If the property is bought directly from a developer, ask for the premium to start at the handover of the keys and not at the signing of the mashkanta. Price comparison sites also show very variable discounts depending on the offers, for example a constant 45% discount over the whole term, or 65% for two years then 20% for life: compare the cost over the whole term of the loan.

A tip on the health declaration

Giving inaccurate information or leaving things out when you take out the policy can lead the insurer not to pay, or to pay only part, and to delay payment. On a loan of 15 to 30 years, this is a risk not worth taking.

As a francophone insurance broker in Israel, I compare mashkanta insurance offers for you, in French. Call me on 054 307 0916 or fill in the form below.