It is mandatory by law, and you will be asked for it in every diveclub counter.
If you don't have one, you can buy at every diveclub/diveshop at the time you go diving (you pay and get the insurance on spot). Some offer DAN, some offer other local insurance companies. DAN insurance sold in Israel is through a local company, and costs ~30 US$. You can buy also DAN Europe at ~65 Euros.
I think that some clubs offer an AIG insurance that is valid for 60 days and is cheaper than annual insurance.
Although Jordan and Egypt offer better dive sites, more colorful and more fish, There are *good* dive sites in Eilat, and with a trained eye one can see more fish and species than imagined. A few examples of things you have chances to see are Eagle Rays, Turtles, Dolphins (Guaranteed if you dive at Dolphin Reef
), Stingrays, Barracudas and lots lots lots of other species. Three years ago we had a close encounter with a huge and fat shortfin Mako...
In the Med Sea there are several great wreck dives (for example the "Scire" WWII Italian submarine at 30m near Haifa, two Missile boats and many others), and also some good shore dives such as the grottoes of Rosh Ha Nikra which are spectacular.