So the question is whether Israel is a democracy. If a state both maintains an occupation and denies the occupied population political rights, then it is not democratic (even if the dominant ethnic group and some others are allowed to vote).

At its core, democracy requires political equality. The governed people must have a meaningful say in who governs them and how. That is not present in Palestine due to Israeli occupation.

It allows Israelis to vote, including Jewish settlers in occupied territories, but it does not allow occupied Palestinians (many of whom live right next to settlers) to vote.