There has been a lot in the news and online lately about insurance companies refusing insurance for certain areas in New Zealand. On 3 February 2026, Stuff reported that AA Insurance will no longer issue policies in Woodend due to maximum exposure to seismic risk. For the same reason last year, AA Insurance ceased offering new policies in Lincoln and Rolleston, also due to its maximum exposure to seismic risk. In addition, in Westport insurance was halted for new homes, businesses and landlords due to the high flood risk to Westport. The halt was extended to new insurance policies in Blenheim, Renwick and Seddon. Even though this might be temporary, there are repercussions.
So how is this going to affect the purchaser of a property in these areas? Is insurance really that important?
As a purchaser, if you are requiring finance through a bank or any other financier, there is the requirement that the property being purchased is insured. If you are unable to obtain insurance, you are not going to be able to get your finance, and without finance, you cannot purchase.
I remember vividly the earthquakes in Canterbury, not just the devastation and loss, but the problems purchasers had obtaining insurance for their chosen property. Insurance companies issued an embargo and refused to issue insurance for quite some time. The embargo on insurance meant that purchasers could not settle. It caused purchasers to default on their contracts and suffer the penalties that followed. Without insurance, the purchasers could not get their finance, and without finance they could not settle.
A purchaser ready to settle on their new home but had received an insurance quote only, and not a “Certificate of Insurance” ended up in default when an earthquake of a large magnitude occurred close to settlement. This is because overnight the insurance companies would announce an embargo, resulting in the quote being insufficient to obtain full cover. However, those with full “Certificates of Insurance” were able to settle on time.
While the temporary halt on new policies by AA Insurance may affect some, it is possible that this may extend to other insurance companies which could cause havoc, once again, to the ability to purchase property in New Zealand.
It is absolutely imperative that purchasers obtain insurance for their property prior to confirming the Contract.
Therefore:
- Include a Further Term of Sale in the Contract subject to insurance being obtained for the property.
- Make sure the insurance commences from the date you are planning to settle.
- When you get insurance, make sure you receive a “Certificate of Insurance”, not just a quote.
- Send a copy of the Certificate of Insurance to your banker/mortgage broker to ensure that the cover is acceptable for obtaining finance.
To be clear, insurance policies cannot be assigned from one owner to another. A purchaser must get their own new insurance for the property.
Remember, without insurance you cannot get finance, without finance you cannot settle and will be in default of your Contract to purchase.
Yes, insurance is that important.
Note: Katherine’s Blog is not a substitute for legal advice, please contact your lawyer.