Written and professionally reviewed by the Ailon Financing Solutions team
Two insurances with different purposes
The term "mortgage insurance" connects two separate products. Life insurance is designed to protect the settlement of the balance of the debt in the event of death, depending on the identity of the insured, the sum insured and the terms of the policy. Building insurance is designed to protect the mortgaged property in the event of damage covered by the policy.
Building insurance is not contents insurance. Furniture, computers, jewelry and personal belongings are not covered just because building insurance was purchased for the purpose of the mortgage. Third-party liability, water damage through a specific carrier, and other extensions should also be checked separately.
What does the bank ask for and why?
The bank provides a long-term loan for which the property serves as collateral. Therefore he may require a valid life policy and building policy, with a proper record of his rights. The requirement first of all protects the payment of the debt and the integrity of the collateral, and is not a substitute for checking whether the coverage also fits the needs of the family.
The actual requirements may vary according to the type of loan, the age of the borrowers, medical condition, the property and the bank's decision. If there is a medical limitation, one should not conclude from a refusal or an expensive offer that there is no possible route. There are dedicated provisions and rights, especially for people with life-shortening disabilities.
You don't have to buy from the bank's agency
It is possible to receive an offer from the agency that is offered as part of the mortgage process, but it is correct to compare it with other offers. The comparison does not amount to the first month's premium. The price structure over the years, exclusions, medical underwriting, deductibles, water damage coverage, earthquake and important extensions for the family should be checked.
When replacing, three steps must be performed in the correct order:
- Get a full replacement policy and check its terms
- Make sure it meets the bank's requirements and that the appropriate lien is registered
- Cancel the old policy only after the new one comes into effect
This avoids a period in which the loan or property remains without the required coverage.
How do you compare life insurance to a mortgage?
Ask to see not only the first payment but also a forecast of premiums throughout the period. The insurance price may be affected by age, medical condition, smoking, the amount of the loan, the number of insured persons and the term of the loan. Check which of the borrowers is insured and for what amount, what are the exclusions and what happens after partial repayment, recycling or a change in the composition of the loan.
If spouses borrow together, it should not be automatically assumed that each is insured for the full balance of the debt. You must read the insurance details page and make sure that the coverage amounts and payment terms are understood.
How to compare building insurance
The insurance amount for the structure is not necessarily the market price of the apartment. It is usually based on the cost of rebuilding the structure and adjacent parts that are defined in the policy. Check if the amount is suitable for the type of property, area and special features, and what happens in case of missing insurance.
Compare among others:
- Which risks are covered and which are excluded
- The amount of the deductible
- Water damage treatment course
- Earthquake coverage and the option to waive it
- Extensions to third party and content, if they are necessary
- How the insurance amount is updated over time
The true cost of the monthly repayment
The mortgage calculator Shows the payment of principal and interest according to the data entered, but budget planning should also include life insurance, building insurance and other fixed expenses. The Ministry of Finance emphasizes that even when examining the ability to repay, the insurances must be taken into account and not be satisfied with the repayment of the loan that appears in the settlement schedule.
To get a wide picture you can also useThe full cost calculator for buying an apartment and inDiagnosis of readiness for a mortgage. The tools are not an insurance offer and do not replace reading the policy terms.
A short check before signing
- Have you received several comparable offers with the same scope of coverage?
- Were the premiums checked over time and not just in the first month?
- Are the two borrowers and the insured amounts correctly registered?
- Is the building insurance suitable for the construction cost and not just for the minimum requirement
- Are the exceptions, deductibles and water extensions clear?
- Is there unnecessary overlap with other insurances?
- Were the premiums added to the calculation of the monthly expense
Official sources
- Insurance Purchase Guide, Ministry of Finance
- Home insurance comparison, Ministry of Finance
- Steps in taking a mortgage, Ministry of Finance
- Mortgage life insurance for a person with a disability, Equal Rights Commission
- Marketing of life insurance and structure in addition to a housing loan, Bank of Israel
