You’re definitely right in that what “Israel” is doing is much worse than apartheid, but the term is used to refer to racial segregation, which separates Zionist settlers and Palestinians whether they’re in “Israel” proper or in the “Israeli” controlled regions surrounding it.
For more information on the apartheid in “Israel”, check out this nifty article: https://decolonizepalestine.com/myth/israel-not-an-apartheid-state/