The insurance market can be confusing, and it can be difficult to know which policies are worth taking out, renewing, or avoiding. When buying or selling a house, your conveyancer may recommend indemnity insurance – but what is it and do you need it?
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What is indemnity insurance when selling a house?
An indemnity policy can be a beneficial way to safeguard yourself from any potential future repercussions. Your solicitor may suggest this type of insurance if there is a risk of being held liable in the future. It appears that indemnity insurance policies such as this are becoming more commonplace in the sale of property.
What does indemnity insurance cover?
Indemnity insurance policies cover a wide range of scenarios. When selling a house, the most commonly purchased ones are Planning Permission, Building Regulations, and Restrictive Covenant Policies.
- Planning Permission covers cases where the paperwork for any building work is incomplete or missing.
- Building Regulations policies protect you if there is not enough paperwork present.
- Restrictive Covenant Policies protect you if you unknowingly break a restrictive covenant. These covenants can relate to what you can do with your front lawn or who you can sell your property to.
What is an indemnity insurance policy when buying a house?
Buying a house is a huge commitment, both personally and financially. As such, buyers planning to purchase a property want to ensure their investment is wise.
Solicitors can check all the necessary paperwork and run the usual searches. However, sometimes property buyers may face unexpected issues or extra responsibilities.
To protect against this, indemnity insurance policies can be bought to cover different areas of a house purchase.
The following are some of the most common indemnity insurance policies for property buyers:
Pre-existing building work or extensions
This policy protects the policyholder from any costs that may come up if they purchased a house with an extension that wasn’t built in accordance with building regulations or other required documentation/permission. In some cases, they may need to apply for planning permission retrospectively.
In other cases, they may have to remove the extension at their own expense.
However, if they have an indemnity insurance policy in place, it should not only cover the cost of removing the extension but should also compensate them for any decrease in the value of their property that results from its removal.
Restrictive covenant
Property owners are not held financially liable for any restrictive covenants broken by former owners when they have a restrictive covenant indemnity insurance policy in place.
This policy also safeguards them against legal expenses, necessary building work and any decreases in their property value.
Chancel repair liability
If your residence is close to a parish church, you may be asked to contribute to the cost of repairs for the church building. Chancel repair liability indemnity insurance can protect you.
Right of access indemnity insurance
An indemnity insurance policy will safeguard you if, for example, your neighbour’s property is the only way to reach your property or any utilities servicing it.
This policy will protect you from legal costs if your neighbour tries to restrict your access. So you don’t have to worry about legal fees.
However, if you already know about this issue, there’s a very good chance you won’t be covered.
Why should I get an indemnity policy?
People are more likely to take action if they feel wronged by a previous owner or if they face expensive bills to resolve an issue.
Indemnity insurance policies, though they may not be needed to pay out often, are seen as a cost-effective way to guard the buyer or seller against future liability and stop any delays caused by addressing any issues.
Your mortgage provider may ask for an indemnity policy in order to protect their interests. If a problem with the property is revealed, it can lower its value and cause financial loss.
Who to speak to about indemnity insurance?
- Insurance Broker or Agent
This is often the initial point of contact for many individuals. An experienced broker or agent can help you explore the different insurance policies available, answer any queries you may have, and provide quotes.
A broker typically works with multiple insurance companies, giving you a wide range of options, while an agent may be associated with a single insurer.
- Insurance Companies Directly
Some insurance companies sell policies directly to customers. You can reach them through their customer service departments or websites.
Professional associations may provide or recommend specific indemnity insurance products tailored to the needs of certain professions, such as doctors, lawyers, and architects.
- Your Solicitor
They can give you advice about what kind and how much indemnity insurance you may need, particularly if you are operating a business or providing professional services.
- Comparison Websites
Comparison websites are a great place to begin learning about the different insurance options available. However, it’s important to always do thorough research and read all terms and conditions before making a decision.
When inquiring about or purchasing indemnity insurance, it’s recommended to read policy terms and conditions carefully. Make sure you understand any exclusions or limitations and clarify any doubts you have with the insurer.
It’s also a good idea to regularly review your coverage to ensure it remains appropriate for your needs.
Indemnity insurance can be complicated, so it’s best to seek expert advice when making a decision.
Common indemnity insurance policies
It is best to speak to your conveyancer to determine which policies may be necessary. There are a variety of policies that could be suggested, so it is important to liaise with your conveyancer to find out what is required.
Planning permission insurance
This type of indemnity insurance policy is a great option if your home has had renovations done without planning permission or if there is no evidence that the changes were within the bounds of the permitted development rights.
Getting an indemnity policy will help protect you from any enforcement action by the local authorities. It can also provide the necessary certificates and paperwork for compliance.
Boiler indemnity
If you are selling your house but are unable to provide a boiler installation certificate, you should consider getting an indemnity insurance policy to cover it.
A gas safety certificate benefits the potential buyer, assuring them of the boiler’s operational quality. If you have this certificate, taking out an indemnity policy is unnecessary.
Windows indemnity
Since 2002, it has been a legal requirement in England to have a FENSA certificate when installing new windows or doors. If your certificates are missing, an indemnity policy can protect you from any costs that may come from action taken against you for not following regulations.
How much does indemnity insurance cost?
Indemnity insurance can vary significantly in cost, ranging from as little as £20 to as much as £300, depending on the value of your property and the type of policy you choose.
For example, a policy to cover a building without the correct certificates can cost a few hundred pounds, while a chancel repairs policy is much cheaper.
Specialist companies only provide indemnity insurance, so you’ll need to get a quote from your conveyancer.
Is indemnity insurance worth it?
Your conveyancer may suggest taking out a policy. Before agreeing, it is important to find out what it is for and to research different options.
A policy is only necessary when other solutions are unable to resolve a problem. There may be cheaper alternatives, so be sure to consider them before signing up for a policy.
If you are selling a property, contact us at Property Saviour. We will cover all legal fees and provide a free house valuation.
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- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
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- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
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- We share our solicitor’s details and issue a Memorandum of Sale.
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