Bank to offer free home loan death policy

ASB has pledged to waive interest payments for a year on home loans of households in which one of the borrowers dies.

Banks have shown how supportive they can be to households in financial distress during the Covid-19 pandemic.

In all, 54,166 borrowers with mortgages and other kinds of loans at the big banks have been granted total repayment ‘‘holidays’’ after losing incomes as a result of the economic disruption caused by the pandemic, and a further 61,438 have been allowed to make reduced payments.

Now ASB has launched Compassionate Care, a free addition to its home loans which will see the bank waive interest costs for 12 months if one of the borrowers on the home loan dies.

The bank hoped that would make it easier for households to cope with the death of an income earner, but stressed the move was not designed to replace the need for life insurance.

About 160,000 existing ASB home loan customers will automatically be covered by the policy, which did not extend to borrowers aged 65 or over.

‘‘We know that mortgage repayments are one of the biggest financial commitments for most homeowners, so, in case the unexpected happens, we want to provide our customers with peace of mind and some breathing space during an incredibly difficult time, so they can focus on what’s important,’’ said Craig Sims, ASB’s executive general manager.

In all, about 38 per cent of adult New Zealanders had life insurance, Sims said.

The cover for the scheme provided by insurer AIA.

The bank would proactively is identify and pay out when customers become eligible for interest payments to be waived, Sims said.

‘‘Having to worry about financial stresses when someone you love passes away is the last thing we want people to be doing, so we hope this provides some reassurance and support.’’ .

He said the bank had planned the change before Covid-19 struck, but that the pandemic had temporarily delayed the launch.