Insurance and your new build: what you need to know (minus the boring bits)
If you’re about to build, here’s something that often slips under the radar until the last minute: insurance.
Not the most exciting topic, I know, but absolutely one of the easiest ways to avoid delays, headaches, and panicked phone calls from the bank.
As a mortgage adviser who spends most of his time working with new builds and construction lending, I’ve seen plenty of projects get held up simply because insurance wasn’t sorted early. So here’s a simple, no-nonsense rundown of what you (or your clients, if you’re a builder) should know.
1. Builder’s-risk / contract works cover
This is the big one during construction.
When you’re building, there’s a lot that can go wrong: fire, storms, theft of materials, damage during earthworks, or something as simple as a subcontractor reversing into the framing.
In New Zealand, this type of cover is usually called contract works insurance or builder’s-risk.
Most lenders will not release any progress payments until they’ve seen proof of this insurance.
A couple of handy tips to remember:
Make sure the bank or lender is listed as an interested party on the certificate.
The policy usually ends at completion or hand-over, so it won’t carry you into move-in day.
If you’re doing a managed build or bespoke project, check early whether you or the builder is responsible for arranging this cover.
2. Your home insurance at hand-over
Once the house is complete and you’re about to take possession, everything shifts to a standard home and contents policy.
Your lender will want proof of home insurance before they will settle the loan or release the final payment.
Key points here:
The lender needs to be noted as the mortgagee or interested party.
If the house is unusual (sloping site, earthquake zone, coastal erosion risk, non-standard construction etc), insurance could be expensive or even declined.
If in doubt, check early - insurance surprises can derail your finance at the end of a build.
3. A quick note on public liability
Public liability is usually taken care of by the builder. It covers things like accidental damage to the neighbour’s property or injuries to third parties while the build is underway.
Banks won’t always ask for this, but it’s still worth checking your builder has it in place.
It also becomes important if:
you’re doing a labour-only build
you’re project managing the build yourself
you’re doing a renovation where responsibilities aren’t as clear
In those situations, make sure you know exactly who holds the cover. And if it needs to be arranged by you, it’s a good idea to have a chat with a trusted insurance broker to get the right policy sorted.
4. Why builders should care about this too
Insurance isn’t just the buyer’s problem; it affects the builder as well.
Many building contracts require proof of contract works insurance before work can start.
Some lenders will ask the builder directly for details.
A delay in insurance can delay progress payments, which can affect cash flow.
A two-minute check early on can avoid delays later.
Checklist
A simple guide for clients and builders:
Before site works begin:
✔ Contract works policy active
✔ Correct insured party
✔ Correct sum insured
✔ Bank listed as interested party
At settlement or hand-over:
✔ Home and contents policy active
✔ Bank listed as mortgagee/interested party
Special situations:
✔ Renovations or relocatables
✔ Hazard zones
✔ Unconsented work
✔ Anything insurers might view as higher risk
Documentation:
✔ Keep copies of all certificates and schedules
✔ Provide to your lender early
✔ Update if the policy changes
A reminder: Insurance isn’t legally required in NZ, but banks won’t lend without it. If you want the keys, you need the cover.
Final Thoughts
Getting insurance right at the start can save you a lot of stress at the end. It keeps the build moving, keeps the bank happy, and gives you peace of mind while your new home takes shape.
If you’re planning a build and want some guidance around finance, insurance requirements or how lenders treat different types of construction, feel free to reach out. At Colab, we’re here to help you every step of the way.