Breaches of the ban could result in a fine of up to $200,000.
A ban on retrofitting foil insulation in residential properties is planned to come into effect from 1 July.
Since 2005, five people have died after being electrocuted when foil insulation they were installing came into contact with electrical wiring. The foil has been used for many years for underfloor insulation.
The proposed ban is intended to coincide with new regulations requiring rental properties to be insulated. Foil insulation will not be allowed to be installed in the estimated 180,000 rentals that will need to be retrofitted to comply with the regulations.
The Ministry of Business, Innovation and Employment has proposed the foil insulation ban under the Building Act, the only time the Act has been used to outlaw a product. Breaches of the ban could result in a fine of up to $200,000.