Insurance Requirements for Home Loan Approval in New Zealand
What NZ banks need before your home loan can settle.
Updated May 2026 by Duane Aarts
Banks usually require house insurance to be arranged before your home loan can settle.
This guide explains what insurance documents the bank may ask for, the difference between a Letter of Intention and Certificate of Currency, and how to arrange cover before settlement.
If you are still working through the buying process, the Home Loan Process guide explains the key steps from approval through to settlement.
Insurance steps before settlement
Arrange insurance
Start the insurance process early so your cover is ready before settlement day.
Confirm sum insured
Check the rebuild amount is suitable for the property and meets lender expectations.
List the bank
Your lender usually needs to be recorded on the policy as the mortgagee.
Send certificate
The Certificate of Insurance needs to be provided before the loan can settle.
Why do banks require insurance before settlement?
When a bank approves your home loan, the property becomes the security for the lending. Before settlement, the bank needs to know that the property can be fully insured from the day you take ownership.
This is a standard requirement for most NZ home loans. Insurance helps protect both you and the lender if the property is damaged by events such as fire, flooding, earthquakes, or severe weather.
Having insurance arranged early also helps avoid unnecessary settlement delays while your solicitor and lender are preparing the final loan documentation.
Before confirming finance, the bank usually needs to know that full house insurance can be arranged over the property they are lending against.
Letter of Intention vs Certificate of Currency
Most banks will initially accept a Letter of Intention before requiring the final Certificate of Insurance closer to settlement.
Letter of Intention
Usually provided earlier in the process to confirm insurance can be arranged over the property.
- Often accepted when going unconditional
- Shows the insurer is willing to provide cover
- May include estimated cover details
- Commonly used before final settlement documentation
Certificate of Insurance
The final insurance confirmation usually required shortly before settlement.
- Confirms active insurance cover is in place
- Usually lists the bank as mortgagee
- Shows the policy start date and insured property
- Required before the bank releases loan funds
What is ‘Sum Insured’ and why does it matter?
Sum insured is the maximum amount your insurance company will pay to rebuild your house if it is damaged. When arranging house insurance, it is important to choose a sum insured amount that properly reflects the cost to rebuild the home.
This is not the same as the market value of the property, the purchase price, or the land value. It is based on the estimated rebuild cost, including things like demolition, debris removal, professional fees, and council fees.
Your insurance provider can usually help confirm an appropriate sum insured amount. You can also use the external Cordell Sum Sure calculator as a guide when estimating rebuild cost.
Sum insured is
- The estimated cost to rebuild your house
- Demolition and debris removal costs
- Professional and council fees
- A figure your insurer uses to set cover
Sum insured is not
- The market value of the property
- The amount you paid for the house
- The land value
- The same as your mortgage amount
Can I choose my own insurer?
Yes. You are welcome to arrange insurance through any insurer you are comfortable with, as long as the policy meets your bank’s requirements before settlement.
Many Canterbury Home Loans clients choose to arrange insurance through Tower because they are familiar with the home loan settlement process and can usually provide the documents banks need. However, this is optional and there is no obligation to use Tower.
You can use your own insurer if you already have a preferred provider.
You can compare quotes and cover options before making a decision.
The key requirement is that your bank receives acceptable insurance confirmation before settlement.
Need a fast and easy way to arrange your insurance?
We work closely with Tower Insurance, who can usually arrange a Letter of Intention and Certificate of Insurance quickly to help keep your settlement on track.
Fast turnaround times
No obligation quote
Familiar with bank requirements
Many CHL clients already use Tower
What happens next?
Submit the form
Tower contacts you
Insurance documents are arranged
Request insurance contact
Complete the form below and we’ll arrange for Tower to contact you about your insurance options.
Insurance Tips for First Home Buyers
If this is your first home, arranging insurance can feel like another task on an already busy settlement checklist. These simple tips can help you avoid delays and choose cover with more confidence.
Arrange insurance early
Start before finance is due so there is time to get a Letter of Intention or Certificate of Insurance.
Compare excess amounts
A lower premium can sometimes mean a higher excess, so check what you would need to pay if you claimed.
Check key exclusions
Ask what is not covered, especially for older homes, retaining walls, outbuildings, or known property issues.
Confirm replacement cover
Make sure the sum insured is based on rebuild cost, not the purchase price or the property’s market value.
Tell your insurer about changes
If you plan renovations, extensions, or major work, check whether your insurer needs to know before work starts.
If you are still working through the buying process, the First Home Buyers Guide explains the key steps from planning through to settlement.
Common Insurance Questions
These are some of the most common insurance questions clients ask before home loan settlement.
When do I need insurance before settlement?
You should usually start arranging insurance as soon as your offer is accepted and before your finance condition is due. Most banks need acceptable insurance confirmation before settlement can happen.
What is a Certificate of Currency?
A Certificate of Currency, often called a Certificate of Insurance, confirms that insurance cover is in place for the property. It usually shows the insured property, policy start date, sum insured, and lender details.
Does the bank need to be listed on the policy?
Yes, in most cases the bank needs to be listed as the mortgagee or interested party on the insurance policy. This confirms the lender has an interest in the property being insured.
Can I use my own insurer?
Yes. You can use your own insurer, provided the cover meets your bank’s requirements. Tower is an option for Canterbury Home Loans clients, but there is no obligation to use them.
What happens if insurance is delayed?
If insurance confirmation is delayed, the bank may not be able to release loan funds on time. This can create settlement delays, so it is best to arrange insurance early.
Can insurance affect finance approval?
Yes. If a property cannot be insured, or the insurer raises concerns about the property, the bank may need to review whether it is still comfortable lending against that property.
How quickly can insurance usually be arranged?
Timeframes vary depending on the property and insurer. Many standard homes can be assessed quickly, but properties with previous damage, unusual construction, flood risk, or earthquake-related issues may take longer.
What is a Letter of Intention from an insurer?
A Letter of Intention confirms that an insurer is willing to provide cover for the property. Banks may accept this earlier in the process before the final Certificate of Insurance is issued closer to settlement.
This information is intended as a general guide only and does not replace personalised insurance advice. Insurance requirements can vary depending on the lender, insurer, and property type.
Ready to arrange your insurance?
If you would like help arranging insurance before settlement, we can connect you with a trusted insurance adviser familiar with home loan requirements.