Written by · Reviewed by Smiths Insurance & KiwiSaver — licensed Financial Advice Provider (FSP712931) · Last updated 2026-10-20

Is life insurance mandatory or required by banks for a mortgage in NZ?

No New Zealand law we found makes life insurance a condition of a home loan, and the bank pages we read treat it as optional. What lenders do require is insurance on the house. The Responsible Lending Code says a lender can in some circumstances require credit-related insurance, "for instance to protect a secured asset". Your loan offer is the only document that lists your lender's conditions, so read it.

In short

House insurance and life insurance are different products

When a bank or a conveyancer says "you need insurance before settlement", they almost always mean cover on the property. The two products protect different things.

House (building) insurance Life insurance
Protects The property that secures the loan The lives of the people insured
Pays For damage to the building, as the policy sets out A lump sum on death, and in most products on terminal illness, to the owner or named beneficiary
Do banks ask for it? Yes. ANZ says it must be in place before settlement; Kiwibank says it is "often a condition" Not on the bank pages we read
If you have none Check your loan offer for what the lender says happens if cover is missing The loan carries on; debts in your name are paid from your estate

The line between them matters because a "mortgage insurance" label can mean three things: house cover, life cover sized to the loan, or monthly repayment cover that pays if you cannot work. See life insurance versus mortgage protection for the second and third.

What the law and the lending code say

Credit-related insurance, as the Credit Contracts and Consumer Finance Act 2003 defines it, covers insurance over secured property and "consumer credit insurance", which is cover against death, disability, sickness, injury or unemployment where the insurer's liability follows the borrower's liability under the credit contract (CCCFA).

The Responsible Lending Code (MBIE, July 2024) says a lender can sometimes require a borrower to take out that kind of insurance, but section 69 means it must not make an unreasonable requirement. A requirement is unreasonable if it is not reasonably necessary to protect the lender's legitimate interests, or not reasonably justifiable given the risks. The Code adds that unless the lender requires the cover, it "should explain that credit-related insurance is optional" and the borrower "should be required to expressly opt in" (MBIE: Responsible Lending Code). It also says a lender should not mislead you about whether you have a choice of insurer.

In plain words: insurance that protects the house is easy for a lender to justify. A personal life policy is much harder to justify as a condition, and the Code expects optional cover to be offered as optional. That is our reading of general information, not legal advice, and a particular loan contract may say something different.

What the banks' own pages say

We read each bank's public pages on 20 October 2026. Several home loan pages could not be read, so the table says what we saw and what we could not see.

Bank What we found Who sits behind its life cover
ANZ "You must have adequate house insurance in place before settlement day." Its life insurance page says the cover "could help support your loved ones financially" Chubb Life, ANZ's page says "third party insurers" underwrite it
Kiwibank "Getting house insurance is often a condition on home loans." Its home loan page points to its terms and conditions, which we did not read nib nz limited, which pays Kiwibank referral fees
ASB We could not read a conditions page AIA New Zealand Limited
BNZ We could not read a conditions page; BNZ says "We no longer provide life insurance" Partners Life
Westpac Its site returned an error Fidelity Life

We did not find a surveyed rule across all five banks, so we do not claim one. Our bank versus adviser comparison sets out who underwrites each bank's cover and how each is paid. If a lender arranges insurance with your loan, the Code says it should not suggest you cannot get cover from other providers unless it truly requires a particular insurer.

Does life insurance affect your mortgage application?

We found no lender page or regulator source saying that holding life insurance makes an application more likely to be approved, or that a lender counts a life policy as an asset or as income. Do not assume it does.

Two sourced points help. First, a term life policy has no cash value to a lender to count: Momentum's Quick Life wording says there is no cash value, and AIA's wording says no surrender value. The policy pays when a claim is made, not before. Second, if a lender arranges insurance and finances the premium, the Code says it should check you can pay the premiums without substantial hardship. That is about cover the lender arranges, not about a policy you buy yourself.

Life insurance "attached to" or "linked to" a mortgage

Some cover is linked to the loan. The Act's "consumer credit insurance" is cover whose payout is tied to what you owe, and the Banking Ombudsman Scheme has said loan protection policies "pay out to the lender rather than to the insured (or his or her estate), as happens with life insurance policies" (Banking Ombudsman Scheme, read from an archived copy). Before you accept any insurance a lender offers with your loan, ask in writing:

  1. Is it a condition of the loan, or an optional extra?
  2. Who is paid if I die or cannot work: the lender, or my family?
  3. What happens to the cover if I refinance or switch lender?
  4. What does it cost, and is the premium added to the loan?

Buying from the bank or independently

Where you buy is your choice. A bank page shows one insurer's cover; a licensed adviser can approach several. Both can be paid commission or referral fees, so ask how much (FMA: Insurance advice). Our guide to adviser versus direct buying sets out the trade-offs.

A short protection checklist for a first home

  1. Arrange house insurance before settlement day. This is the cover lenders ask for.
  2. Read the loan offer for any other insurance condition, and ask the lender in writing if unsure.
  3. Ask whether anyone relies on your income or would carry the loan alone. If so, look at life cover or repayment cover. See mortgage life insurance and first home buyer insurance.
  4. Name a beneficiary and make a will, so a payout goes where you intend.

Momentum Life's Quick Life accepts ages 18 to 65 with no health questions, for $50,000 to $300,000 per person, rising 3% a year to a $500,000 cap. For the first 2 years it excludes pre-existing conditions and suicide. It will not match a large mortgage on its own. A healthy person can usually get more cover for less with fully underwritten cover through an adviser. See the Quick Life plan page.

Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This page is general information, not advice. QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission if you buy through our link; see how we are paid and our disclosure. Momentum Life Limited's A.M. Best financial strength rating is B (Fair), affirmed 11 February 2026, a range Momentum's own table calls "Vulnerable"; see Momentum's financial strength page. The buttons on this page open Momentum's application only; use them only if you have decided you want a quote.

Frequently asked questions

Do I have to have life insurance for a mortgage in NZ?

We found no law or bank page that makes it a condition. Lenders do ask for house insurance. Read your loan offer and ask in writing if anything is unclear.

Do you need life insurance if you have a mortgage?

Not by rule, but the debt does not end if a borrower dies. Whether cover makes sense depends on who would carry the loan. See do you need life insurance for a mortgage.

Can a bank refuse a loan because I have no life insurance?

We found no source saying so. A requirement about credit-related insurance must be reasonable under section 69 of the Act. A particular loan contract may say more, so check yours.

Is life insurance counted as an asset by a lender?

We found no source that says so. Term life cover has no cash value, so there is nothing to count until a claim is paid.

References

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