What is indemnity insurance?

Indemnity insurance often comes into play during property transactions. This insurance protects both buyers and sellers against potential financial losses arising from issues related to the property. If a mortgage lender is at risk of withholding funds, the solicitor may recommend indemnity insurance.

What is indemnity insurance when buying a house?

Indemnity insurance is a policy that can be essential when buying a house. If a survey or property search uncovers a defect that could jeopardize the sale, an indemnity insurance policy can be taken out by either the buyer or seller. This policy safeguards against any future legal action or loss of property value resulting from the identified defect.

Solicitors and indemnity insurance

Conveyancing solicitors might request indemnity insurance to address concerns about potential property issues that could impact the sale. For instance, missing certificates for boiler installation or unrecorded planning applications and building work are common reasons. Typically, it pertains to minor property issues with incomplete paperwork.

What does home indemnity insurance cover

Indemnity insurance does not cover the cost of fixing defects, such as replacing a faulty boiler. Instead, it covers legal costs from third-party claims related to the issue or defect in the future.

How much does indemnity insurance cost?

The cost of indemnity insurance varies based on the type and the financial coverage limit. Higher coverage limits mean higher premiums. On average, expect to pay several hundred pounds, with premiums typically paid as a one-off payment.

Who is covered?

Indemnity insurance policies cover both buyers and sellers and remain valid for the lifetime of the property ownership.

Who pays for indemnity insurance?

Usually, the seller pays for indemnity insurance because it addresses issues or defects in their property. The seller has a greater risk if the insurance is not obtained, and the sale falls through.

Common types of indemnity insurance

Restrictive covenant insurance

This insurance covers financial repercussions if a previous owner breached a restrictive covenant on the property. Restrictive covenants limit specific activities on the property and are part of the property deeds.

Planning permission insurance

If past alterations to the property were done without planning permission or in violation of regulations, indemnity insurance can cover this. It also applies to missing building regulations certificates.

Indemnity for a boiler

If a seller cannot locate the boiler's installation certificate, indemnity insurance can protect against claims regarding its safety. However, obtaining a gas safety certificate is advisable to reassure buyers.

Window indemnity insurance

Windows installed or replaced since 2002 require a FENSA certificate. If the seller lacks this certificate, indemnity insurance covers local authority enforcement claims that the windows do not meet building regulations.

Chancel repairs

Some properties near churches might have to contribute to chancel repairs. This obligation is typically revealed during property searches, and indemnity insurance can cover these costs.

Absence of easement

Indemnity insurance can protect against loss of property value if easement rights are withheld. Easement rights allow crossing another property to access your own.

Insolvency

If buyers receive financial assistance from a third party for their deposit, indemnity insurance may be advisable. It protects against claims by creditors if the third party faces financial trouble.

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While indemnity insurance when buying a house might not be necessary for everyone, it's important to understand it if your solicitor mentions it. Register for property alerts to stay up-to-date on properties as they hit the market.