Written by · Reviewed by Smiths Insurance & KiwiSaver — licensed Financial Advice Provider (FSP712931) · Last updated 2026-08-19

Life Insurance With a Home Loan NZ: Bank Loan Cover Is Nearly Extinct

No New Zealand bank we could find still sells a new life insurance policy tied to your loan balance. The Co-operative Bank closed the last publicly documented one, Loan Plus, stating "from 1 May 2024 we are no longer offering new policies for this product" (The Co-operative Bank, retrieved 19 August 2026). Kiwibank's page of products no longer offered says plainly, "we no longer offer Home loan Insurance" (Kiwibank, retrieved 19 August 2026). Westpac lists Flexicover and Mortgage Repayment Insurance among its closed products.

That is the single most useful fact for anyone shopping for cover with a mortgage today, because it means the choice most articles describe, bank loan cover against a standalone policy, is no longer the choice you are actually being offered.

A house key on a ring beside a loan statement and a policy schedule

What do New Zealand banks actually sell now?

A referral. Every bank we checked has moved to arranging or referring a third-party insurer's standalone policy, with a sum insured you choose, that you own. The Commerce Commission noted the underlying change in its personal banking market study: "ANZ, BNZ, Westpac and Kiwibank have sold their insurance business over the past 5 years" (Commerce Commission, Personal banking services market study final report, 20 August 2024, retrieved 19 August 2026).

Bank What it offers now Who underwrites it What the bank discloses about payment
ANZ Chubb Life's Life and Living and Assurance Extra Chubb Life "ANZ may receive a commission on any policy it arranges"
ASB Lifestyle Security Plan, including a mortgage repayment benefit AIA New Zealand Underwritten by AIA and "distributed through ASB Bank Limited"
BNZ Referral to Partners Life Partners Life "BNZ personnel are not personally paid a commission or incentivised for referring customers to Partners Life"
Westpac LifeProtect Fidelity Life "Westpac will receive commission payments as a result of the arrangement of Fidelity Life policies"
Kiwibank Life and Living Insurance nib nz limited "nib nz limited pays fees to Kiwibank Limited for Kiwibank's referral of customers to nib nz limited"
TSB Life and living insurance Chubb Life "TSB Bank Limited receives a commission from the sale of insurance policies sold by Chubb Life when referred by TSB"
The Co-operative Bank Life Plus, a standalone policy Co-operative Life Limited Sum insured $20,000 to $3 million, ownership transferable
SBS Bank Advice placing cover with third parties Chubb Life and Partners Life Its advisers "do not work on commission"

Each statement is quoted from that bank's own website, retrieved 19 August 2026 and linked in the references. ASB's mortgage-linked benefit is income protection rather than life cover: it covers "up to 115% of your mortgage repayments on your residential property or up to 45% of your income (before tax)", capped at $6,000 a month.

The commission disclosures matter because the usual argument against advisers, that they are paid by the insurer, applies with equal force at the bank counter. Both channels are paid by the insurer. The difference is the size of the panel: a bank arranges one insurer's product, an adviser prices several. Our guide to how insurance advisers get paid in NZ sets out the mechanics.

Who owned the policy, and who got the money?

The bank, and the bank. This is the part that vanished with the products, and the Co-operative Bank's Loan Plus wording is the only New Zealand loan-cover document we could read in full.

Its definitions section defines the loan as "the loan owed by the Life Insured to the Policy Owner", which tells you who the policy owner is before you reach the operative clause. That clause is explicit: "The Policy Owner shown on the Policy Schedule owns this Policy. We will pay a claim under this Policy to the relevant Loan account. This Policy cannot be assigned or transferred by You. If the Loan is assigned to another party by the Policy Owner, then this Policy will also be assigned to that same party" (The Co-operative Bank, Loan Plus policy wording, retrieved 19 August 2026).

Set that against the same bank's standalone product, Life Plus, which is still sold: "We will pay a claim under this Policy to the Policy Owner, or their legal representative", with ownership transferable by memorandum of transfer (The Co-operative Bank, Life Plus policy wording, retrieved 19 August 2026). Same bank, same underwriter, two entirely different products.

The Banking Ombudsman puts the general point in one sentence: "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 quick guide, insurance policies, updated December 2024, retrieved 19 August 2026 via the Internet Archive snapshot of 7 March 2026).

The practical difference is not the size of the payment. It is who decides. A standalone policy pays a lump sum to your beneficiary, who can choose to clear the mortgage, keep it and invest the money, or move house. Loan cover clears the debt whether or not that is what the household needs. If a surviving partner would rather sell and downsize, the insurance has already spent itself on the wrong asset.

One more feature of Loan Plus deserves naming, because it is the sort of thing nobody reads: "The premium is calculated based on your age, the loan term and the loan amount. It's charged up-front, built into the total loan amount and is repaid at the same time the loan is." You borrowed the premium and paid interest on it for the life of the loan.

What happened when you refinanced?

The cover ended, usually silently. Loan Plus ended cover when "the Loan Balance has been repaid in full". Kiwibank's Home Loan Insurance fact sheet stated that cover could be cancelled when "you or Kiwibank close the home loan account(s)" (Kiwibank, Home Loan Insurance fact sheet, SI1152 MAY15, retrieved 19 August 2026).

This is also in statute. Section 53 of the Credit Contracts and Consumer Finance Act 2003 provides that "a consumer credit insurance contract financed under a consumer credit contract is terminated on the full prepayment of the consumer credit contract" (CCCFA 2003, retrieved 19 August 2026).

The Banking Ombudsman flags exactly where that bites: "Sometimes, when a customer's borrowing amount is increased, the existing loan will be repaid and a new loan made at the higher amount. In the process, loan protection insurance on the old loan can sometimes be automatically cancelled, a fact missed by customers and sometimes not pointed out by banks."

A standalone policy has none of this exposure. It is not attached to a loan, so topping up, refixing, refinancing to another bank or selling and buying again leaves it untouched. That portability is the strongest single argument for a standalone policy, and it is stronger now that people refinance more often than they used to.

What is a shrinking payout actually worth?

Roughly $109,000 less at year 15, on the average new New Zealand mortgage.

Loan cover pays the outstanding balance. A standalone level policy pays the sum insured you chose, which does not fall. Because a table mortgage repays slowly at first and quickly at the end, the gap between those two opens wider than most people expect through exactly the years when a family has young children and the least financial slack.

The average new mortgage in New Zealand was $377,569 in June 2026, down 6.6 percent on the $404,228 of June 2025, on Reserve Bank lending data (NZ Adviser, 30 July 2026, retrieved 19 August 2026). The chart below amortises that loan over 30 years and sets the falling balance against a fixed $377,569 of cover.

What each policy pays: loan balance against a fixed sum insured$377,569 mortgage, 30-year table loan, 6.0% assumed. The shaded area is what decreasing cover does not pay.Standalone policy, level $377,569Loan cover, pays the outstanding balance$400,000$300,000$200,000$100,000Year 15 gap$109,308051015202530Years into the loan

Chart: QuoteHub amortisation of the $377,569 average new mortgage reported from Reserve Bank data for June 2026, on a 30-year table loan at an assumed 6.0 percent. The interest rate is our stated assumption, not a published rate. Illustration only, not a quote.

Years into the loan Loan balance, what decreasing cover pays Level $377,569 policy Difference
0 $377,569 $377,569 $0
5 $351,345 $377,569 $26,224
10 $315,972 $377,569 $61,597
15 $268,261 $377,569 $109,308
20 $203,906 $377,569 $173,663
25 $117,099 $377,569 $260,470
30 $0 $377,569 $377,569

QuoteHub calculation. Balances are standard table-loan amortisation of the published average new mortgage at an assumed 6.0 percent over 30 years, rounded to the dollar. A different rate moves every row, and a shorter term moves them faster.

The counterargument is real: decreasing cover was cheaper precisely because it paid less over time, and a household that only ever needed the debt cleared was not underinsured. But the flat line is what most families actually need. A mortgage is rarely the whole obligation, and the difference in that final column is roughly the cost of raising the children who are still at home.

Can a bank make you buy it?

Not without a reason it can defend. Section 69 of the Credit Contracts and Consumer Finance Act 2003 says a creditor "must not make any unreasonable requirement as to the terms on which the debtor is to take out or obtain credit-related insurance", and that "a requirement is unreasonable if it is not reasonably necessary for the protection of the legitimate interests of the creditor" (CCCFA 2003, retrieved 19 August 2026).

The Responsible Lending Code, in force from 31 July 2024, sets the practical expectation: "unless the lender requires the borrower to obtain credit-related insurance, a lender should explain that credit-related insurance is optional and the borrower should be required to expressly opt in" (MBIE, Responsible Lending Code, retrieved 19 August 2026).

In practice New Zealand banks draw the line the same way. ANZ's home buying guidance states "you must have adequate house insurance in place before settlement day", while life cover is framed as something you "may also want to consider" (ANZ, retrieved 19 August 2026). Kiwibank's legacy fact sheet said its Home Loan Insurance "is completely optional". House insurance is a condition of lending. Life insurance is not.

What does it cost, and what is it worth?

We cannot tell you the price difference, because no New Zealand bank publishes a price for its life cover and neither did the closed loan-cover products. Every one of the eight uses a quote engine or a phone number. We are not estimating, and we are not publishing a Quotemonster figure.

What is published is the mortgage repayment version. MoneyHub prices it across a $500,000 mortgage with $3,500 monthly repayments, an eight-week wait and a two-year payment period, and gets annual costs of $440.47 to $572.74 for a 35-year-old male accountant, $1,293.59 to $1,536.59 for a 45-year-old male builder, and $4,549.55 to $4,886.57 for a couple aged 50 who smoke (MoneyHub, updated 19 April 2026, retrieved 19 August 2026). Those are prices for a disability benefit, not for life cover, and the range across insurers on identical profiles is the reason to compare.

There is one hard published number on the value of bank-counter credit insurance in New Zealand, and it should be read carefully. The Financial Markets Authority found that claim loss ratios for credit card repayment insurance "can be as low as 10%, in comparison to loss ratios of approximately 80% for health insurers and 47% for life insurers" (FMA, Review of credit card repayment insurance products, September 2021, retrieved 19 August 2026). That figure is about credit card repayment insurance, a different product from either bank-arranged life cover or home loan protection, and we found no published loss ratio for those. It is context, not a verdict.

Honest limits on this page

Three things we could not verify, stated so you do not read more into this page than it supports.

There is no published price for bank life cover in New Zealand, so there is no verified cost comparison between bank-arranged and independently arranged cover. Anyone telling you the bank is more expensive is guessing, and so would we be.

The Westpac Flexicover and Mortgage Repayment Insurance wordings, and the full Kiwibank Home Loan Insurance policy wording, are not published online, so the ownership and refinance analysis rests on the Co-operative Bank's Loan Plus wording, the Kiwibank fact sheet and the Banking Ombudsman's general description. Those are consistent with each other, but we have only one bank's full document.

And the absence of a loan-balance life product on ANZ, ASB, BNZ, TSB and SBS websites is weaker evidence than a positive statement. It means no such product appears on their current sites, not that none exists anywhere in their back books.

What to do if you already hold loan cover

Find out three things before you cancel anything: who owns the policy, who a claim would be paid to, and whether the cover survives a refinance. Your policy schedule answers the first two. If the answer is the bank, and you are planning to refinance or sell, get replacement cover in force before the old loan is repaid, not after. A gap in cover is underwritten at your current age and current health.

If you want the difference priced across several insurers rather than one, that is what a licensed adviser does. QuoteHub is operated by Craig Smith Business Services Limited, trading as Smiths Insurance and KiwiSaver, a licensed Financial Advice Provider (FSP712931). The insurers on our panel are listed on our disclosure page. We are paid commission by the insurer if you take out cover, disclosed to you before you decide. Start with our mortgage protection calculator to size the cover, and our comparison of life insurance against mortgage protection for the structural choice.

References

Disclaimer: This article is general information only and does not constitute personalised financial advice. Product terms are quoted from the named provider's own published page or policy wording on the date stated, and products change without notice. The amortisation chart and table are QuoteHub calculations on a published average loan size and a stated interest rate assumption, and are illustrations rather than quotes. Insurance is subject to underwriting, and terms, conditions, exclusions and stand-down periods apply. QuoteHub is operated by Craig Smith Business Services Limited, trading as Smiths Insurance and KiwiSaver, a licensed Financial Advice Provider (FSP712931), Christchurch.

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