Savings Policy (Insurance-Linked Savings)

What is a savings policy, tax benefits, fees, when to open one, and comparison with other savings vehicles.

A savings policy (Polisat Chisachon) is an investment product offered by Israeli insurance companies. Think of it as a managed investment account wrapped in an insurance policy structure, offering a degree of flexibility along with professional money management.

How a Savings Policy Works

You deposit money — either as a lump sum or through regular monthly contributions — into a policy managed by an insurance company. The insurer invests your money according to the investment track you choose. You can typically withdraw funds after a short lock-up period, though the tax treatment depends on how long you hold.

Tax Treatment in Israel

Here is where it gets interesting. If you hold the policy for at least 15 years, capital gains are taxed at a reduced rate. The policy also allows you to switch between investment tracks within the same policy without triggering a taxable event — a feature that regular brokerage accounts do not offer in Israel.

Savings Policy vs. Brokerage Account

A brokerage account gives you full control and typically lower fees. A savings policy offers the track-switching tax advantage, professional management, and access to institutional investment options. For hands-off investors or those with a long time horizon, the savings policy can be a reasonable choice.

Watch Out for Fees

Savings policies tend to have higher management fees than index funds or ETFs. Insurance companies charge both an investment management fee and a policy fee. Before signing up, compare the total annual cost and make sure the tax benefits outweigh the extra fees you will pay.

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The information on this page is for educational purposes. Please consult a professional before making financial decisions.

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Frequently asked

+−What is a savings policy in Israel?

A savings policy (Polisat Chisachon) is an investment product from an insurance company. You deposit money, the insurer invests it in your chosen track, and you benefit from professional management and a unique tax advantage on track switches.

+−What is the tax advantage of a savings policy?

You can switch between investment tracks within the same policy without triggering a taxable event — something regular brokerage accounts do not allow in Israel. Holding for 15+ years may also qualify for reduced capital gains tax rates.

+−Should I choose a savings policy or a brokerage account?

A brokerage account gives more control and lower fees. A savings policy offers tax-free track switching, professional management, and institutional investment options. For hands-off investors with a long horizon, a savings policy can work well.

+−What fees do savings policies charge?

Savings policies typically charge a management fee on your balance (0.5-1.5% annually) plus a possible fee on deposits. Compare these costs against brokerage fees, especially for long-term holdings.

+−Can I withdraw money from a savings policy at any time?

Yes, savings policies in Israel are generally liquid. You can withdraw partially or fully, though you will pay capital gains tax on any profits. There is no lock-up period like with Hishtalmut funds.

+−What investment tracks are available in a savings policy?

Insurance companies offer a range of tracks including equities, bonds, mixed, index-tracking, and specialized tracks. You can typically switch between them without triggering a taxable event.

+−Is a savings policy suitable for children's savings?

Yes, many Israeli parents use savings policies for long-term savings for their children. The long time horizon and tax-free track switching make it a practical vehicle for education or future needs.