Is Your Home Insurance Enough to Rebuild After a Disaster?
Most apartment owners in Israel are underinsured by 40% due to soaring construction costs, leaving them vulnerable if homes are destroyed by disasters.
Every apartment owner in Israel should ask themselves a crucial question at least once a year, yet almost no one thinks about it: if my home were destroyed tomorrow by a missile, an earthquake, or any other disaster, would the insurance policy amount cover rebuilding the apartment? Not buying another apartment, not calculating its market value, and regardless of the mortgage balance, but simply rebuilding.
The construction world in Israel has changed dramatically in recent years. Labor and material costs have risen sharply, and so have planning and execution costs. Yet many policies continue to renew almost automatically for the exact same amount. Over the past two years, most policies in Israel have eroded in value. While calculations used to be based on 6,000 or 7,000 NIS per square meter, costs in recent years have already reached between 10,000 and 12,000 NIS - and these are standard construction figures.
The Gap Between Insurance and Reality
In other words, if you own a 100-square-meter apartment whose construction cost until recently was around 600,000 NIS, today it is nearly double. Despite this, policies have remained at the old prices, meaning most apartment owners are underinsured by about 40% relative to the actual cost of rebuilding. The insurance sum reflects the upper limit of the insurance company's liability. If a home is completely destroyed and the reconstruction cost is 1 million NIS, but the policy sets the insurance sum at 600,000 NIS, you will have to pay the difference out of pocket.
Therefore, an insurance sum determined years ago and never reviewed may not reflect the true cost of restoring a home to its previous condition. I would much rather see an insured person pay slightly more and hold coverage matching their actual property than someone who saved a few hundred shekels over the years only to discover, on the hardest day of their life, that they are missing hundreds of thousands of shekels to rebuild their home.
Shared Buildings and Additional Coverage
Those living in a shared apartment building must recognize another critical point: structural insurance does not necessarily reflect the market value of the apartment. It is based on the cost of rebuilding the structure, whereas market value also includes the land component. In a severe earthquake or missile strike scenario where the building is completely destroyed and beyond repair, this gap can become extremely significant. This is why policies include an option to purchase an "additional sum in a shared building" - an issue every apartment owner should at least evaluate.
"Proper insurance is not just a policy sitting in a drawer, but one that is reviewed in advance, tailored to the property and family's needs, and designed to provide a real response the moment we need it."
Home insurance is not merely a legal contract that renews annually. It must reflect the home we live in today, not the home of five years ago. This is precisely where the value of an insurance agent as a professional comes into play: knowing the insured and the property, asking the right questions, identifying changes and gaps, and adapting insurance coverage to a changing reality.
