Life insurance: death cover or savings

In Israel, the expression "life insurance" actually covers two very different families of products: pure death cover, which pays a capital sum to your loved ones if you die during the term of the contract, and long-term savings products, which combine building up capital with elements of cover. Understanding this distinction is the first step towards choosing protection suited to your situation.

What the term "life insurance" covers in Israel

Unlike in France, where "assurance vie" almost always means a savings product, the Israeli market separates the functions more clearly. On one side, death cover (sometimes called "risk" or ביטוח חיים in its most common usage) is a pure protection product: you pay a premium, and if you die during the covered period, a capital sum is paid to the beneficiaries you have named. On the other side, long-term retirement savings go through dedicated vehicles: the pension fund (קרן פנסיה), the provident fund (קופת גמל) and managers' insurance (ביטוח מנהלים), a product historically offered to employees that combines savings and elements of cover (disability, sometimes a survivor's pension). These products are overseen by the Capital Market, Insurance and Savings Authority, which comes under the Israeli Ministry of Finance.

For a francophone arriving in Israel, this set-up can come as a surprise: there is no direct equivalent to the French life insurance contract, which serves both as a savings vault and as an estate-transfer tool. In Israel, each need generally corresponds to a separate product, which has the advantage of clarity but means you must identify clearly what you are trying to cover before signing.

Pure death cover: protection without savings

Pure death cover works like term insurance: if you die during the term of the contract, your beneficiaries receive the agreed capital. If you are still alive at expiry, there is nothing to get back, since there is no savings component. It is a risk-pooling mechanism, comparable in principle to death cover or borrower insurance in France.

This type of contract is often recommended when you have dependants (spouse, children) whose standard of living would depend on your income, or when a bank requires it as part of a home loan (mashkanta - mortgage), a subject we cover in another article on the blog. Its main advantage is a cost that is generally contained compared with an equivalent savings product, since the premium only pays for risk cover, with no capitalisation.

Savings products: gemel, pension and managers' insurance

If your priority is to build up capital or a future income, it is the retirement savings vehicles that meet this need, not pure death cover. As an employee in Israel, you are in principle enrolled by your employer in a pension fund or in managers' insurance under the compulsory pension enrolment scheme, in force since 2008. This product frequently includes a protection component in case of death or disability, in addition to the savings proper.

The self-employed (atsmaïm) do not benefit from this automatic enrolment: they must arrange their own retirement savings and, where appropriate, their death cover, which makes the support of a broker particularly useful so that nothing is left out.

What affects the cost of death cover

Without giving a figure, it is useful to know which factors come into play in calculating a death cover premium in Israel: your age at the time you take out the policy, your declared state of health (and sometimes a more detailed medical questionnaire depending on the amount insured), the amount of capital you want to guarantee to your beneficiaries, and the length of the contract. The earlier you take out the policy and the better your health, the more favourable the terms offered by insurers generally are. That is one more reason not to put this decision off, especially if you have dependants.

How to choose according to your situation

The choice between pure death cover, a savings product, or a combination of the two depends above all on your personal situation: do you have children or a spouse who is financially dependent on your income? Do you have a home loan running? Are you an employee, with cover already included in your pension plan, or self-employed, with no automatic safety net? Are you a new immigrant (oleh) whose former life insurance taken out in France is not necessarily recognised or coordinated with your obligations in Israel?

A simple rule to remember: pure death cover meets a need for immediate protection of your loved ones, while retirement savings products meet a goal of building capital over the long term. In general, the two are not interchangeable and many households need both, in proportions that vary according to age, family make-up and the wealth already built up.

Because every situation is different, especially for francophones arriving from a very different insurance system, it is advisable to review things with a broker specialising in life insurance in Israel rather than mechanically reproducing what you knew in France. A professional can assess with you the level of cover you really need, without selling you a product that is oversized for your needs.

If you would like to review your situation, our francophone team is available for a no-obligation conversation via our contact page .