The big-four bank has launched Compassionate Care, a new home loan benefit, after partnering with insurance company AIA.
ASB will pay the customer's interest payments for 12 months to help them through the period of stress and financial hardship.
Compassionate Care is free for home loan customers and will be available to new and existing mortgage customers.
The benefit goes live today, and ASB believes more than 160,000 customers will be eligible.
ASB is the first bank in New Zealand to offer coverage for bereaved customers. The bank said the benefit was designed "to provide support for customers when they need it most".
Craig Sims, ASB's executive general manager for retail banking, said: "We know that mortgage repayments are one of the biggest financial commitments for most home owners, 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."
The benefit was announced alongside ASB's new partnership with insurer AIA. There is no requirement for customers to sign up for the benefit, and the two companies have promised to make the process "simple and easy".
Sims added: "Supporting our customers’ financial wellbeing is our main priority, and it’s important they know we are here for them, no matter the situation. 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."