The Nuts and Bolts of Car Insurance
Contributor: Danny Newman, Ronen Goldman & Avner Goldfus
According to Israeli law, a car owner is obligated to have at least the basic level of car insurance in order to legally drive the car. This legal requirement is known in Hebrew as Teudat Chova or Bituach Chova. In English – The Compulsory Insurance Certificate.
Car insurance in Israel works differently to car insurance in many other countries, often confusing not only Olim who have recently made Aliya, but also people who have lived in Israel for years.
There are three categories of Israeli car insurance:
1. Bituach Chova (Compulsory Insurance) is the sole legal requirement. The cost is determined by the type of vehicle, age of drivers, accident history, car safety features and usage. Bituach Chova is a no-fault insurance that only covers bodily injury. It does not matter who is at fault. In the event of an accident where there is bodily injury, the injured person will be covered by the Chova certificate of the car owner’s insurance, even if the driver is not at fault. The Bituach Chova covers the driver for bodily injury caused to the driver, passengers and pedestrians that may be involved in an accident. It will not cover people injured in another vehicle. Each car covers its own passengers irrespective of who is at fault.
2. Bituach Makif (Comprehensive Insurance) covers damage to your vehicle and any 3rd party vehicle up to the sums insured specified in your car insurance policy. This insurance is based on who is at fault. Your own car will be insured up to its “book price” value, and therefore there will be no sum insured written in your policy for your own car.
Each policy does however have an upper limit for sums insured when it comes to the amount of damage caused to the other vehicle or property (Tzad Gimmel). It may be important to look into the sums insured here, as not all policies have the same upper limits.
To paraphrase George Orwell, despite the basic concept of comprehensive insurance remaining the same: Some comprehensive car insurances are more comprehensive than others.
3rd Party Liability cover – It is important to check what your limit of liability cover is in the event that you cause damage to 3rd party property. The most common (and default sum) stated in policies is roughly NIS 600,000, however it is possible to increase the liability cover to NIS 1 million depending on the policy you take.
Deductible/Excess on the depreciation clause – After an accident, a loss adjuster (Shammai) assesses two main things: the cost involved in repairing the vehicle (or determining if the car is deemed a total loss) and the loss in value caused to your car as a result of the damage caused, as in many instances, the resale value of the car may be impacted by the nature of damage caused. In the event of an appraised depreciation, the insurance companies will also pay out the depreciated value in addition to the other costs involved in repairing the car.
Most policies have an added deductible (Hishtatfut Atzmit) of 1.5% of the value of the car on top of the typical car policy deductibles. For example, if a car is worth 100,000 NIS, and the car has depreciated by 5,000 NIS as a result of an accident, most insurance policies will pay out 3,500 NIS (5,000 NIS less 1.5% of the 100,000 NIS that the car was valued at prior to the accident).
It is possible to obtain policies that have no deductible on the depreciation clause allowing you to receive full compensation for the true depreciation caused to your car.
Other self-explanatory types of coverage that are usually not automatically included in ‘comprehensive’ policies are cover for riots, strikes and commotions; and earthquake cover (which are automatically included in policies via Goldfus Insurance). These can all be added, depending on the provider.
3. Tzad Gimmel (3rd Party Insurance) only covers damage to a 3rd party property. It does not cover damage to your own vehicle if it is damaged or stolen. This insurance is usually taken out by people with less valuable older cars, when it does not necessarily make financial sense to pay a higher premium to fully insure the car.
It is advisable to add windshield cover and roadside assistance cover to all policies if those are not built in as standard.
Car insurance premiums can be impacted by:
- Age and experience of drivers
- Whether the car is driven on Shabbat
- The number of people insured to drive the car
- Number of claim-free years of driving
An Oleh Chadash, Toshav Chozer or tourist (who may only drive in Israel for up to a year on a foreign license), should obtain a letter from their insurer overseas stating their claims history, which may qualify the driver for a reduced premium. Without this letter, they may be insured as a new driver with a far higher premium.
The car insurance market is dynamic and competitive. It is important to remember to check what type of coverage you are receiving; you may find that it is worth spending a couple hundred shekels more to potentially save you thousands in the future.
For more information about car insurance contact us today!