Whether you are buying a house or selling your house, chances are you will have heard the term indemnity insurance thrown about. But what exactly is indemnity insurance when buying? Will it affect the value of the property? And how exactly do you get an indemnity policy?
In this blog post, we will be answering all these questions and more. If you are looking for a quick answer, check out our interactive menu below!
- What are indemnity insurance policies?
- What does indemnity insurance cover?
- When would you take out an indemnity policy?
- How much does an indemnity policy cost?
- Can I transfer existing indemnity insurance? n
- Who do I speak to about indemnity policies?
- Do I need indemnity insurance for house?
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What are indemnity insurance policies?
Indemnity insurance is a type of protection policy that is often taken out during the conveyancing stage of either buying to selling a house. You will typically have to pay a one-off payment in which you will get a policy that will cover the costs of a third-party making claims against your property.
If you are buying or selling a property that is missing important documents, building regulation certificates, planning permissions, or other legal must-haves, then you will probably be recommended a form of indemnity insurance in order to protect either yourself or make the property more attractive to buyers.
What does indemnity insurance cover?
Indemnity insurance can cover a broad range of issues, however, as a rule of thumb, indemnity insurance covers a legal defect with the property that either cannot be resolved or would be very costly and time-consuming to fix. Instead of spending a lot of time and money trying to fix said legal defect, indemnity insurance instead protects you should it become a problem later down the line.
When would you take out an indemnity policy?
Exactly what a policy will cover will depend on the type of indemnity insurance policies you have decided to take out. Each one will cover various risks that you may come across whether you are buying or selling a property.
Below are some of the most common types of indemnity policies that you are my come across:
Planning permission
This type of policy covers you if you have had building work done on your property, but do not have evidence of planning permission. It will cover you in the event that you incur costs due to a complaint made by the local council or a neighbour.
Building regulation
People may take out an indemnity policy if work has been done on the property but the regulation paperwork provided for it is incorrect or missing. This type of insurance is similar to planning permission indemnity insurance and will cover the cost of any work that may need to be altered as a result.
Boiler indemnity
If you are selling a house and find yourself in the position of being unable to provide an installation certificate for your boiler, then you may wish to consider taking out indemnity insurance to cover it. If you decide not to go down this route, then you could also pay to get a gas safety certificate in order to reassure anyone considering buying your property peace of mind about the safety of your boiler.
Chancel repairs
People may take out a policy for chancel repairs if they live in close enough proximity to a church that they would be liable for repairs. It not only protects you as the owner of the property but also when the time comes it will make your home more attractive to sellers.
Adverse possession
Adverse possession means that the owner of the land only holds the possessory title. If this happens then they will only have claimed ownership of some land without the necessary evidence to satisfy the Land Registry. If you take out indemnity insurance, this policy protects you should someone try and claim back the land from you.
Window Indemnity
It has been a legal requirement in the UK and Wales since 2002 for any new windows or doors to be provided with a FENSA certificate. If you do not have your certificate, then you should seriously consider taking out window indemnity insurance as it will protect you in the event that the local authority should take legal action against you.
Restrictive covenants
As beautiful as older properties are, they will often come with restrictive covenants. A restrictive covenant is a clause that is written into the property deeds and limits the use of the property in certain ways. Examples of restrictive covenants include restrictions over the choice of materials used to do repairs or whether you can add an extension to your property. If the property has breached any of the covenants, the insurance will protect you from the legal fallout or reduction in the property as a result.
Absence of build-over agreement
This policy will cover you in the event that your property has been built over a sewer or within three meters of a sewer without the necessary build-over agreement with the appropriate water authority. This will have an effect on its saleability when it comes to buyers as without this insurance, they will be open to claims made against them.
Insolvency
If you are looking to make your property more appealing to buyers, you should consider taking out this kind of insurance. If you purchased your property with the assistance of another party, then this insurance will protect against costs that you may incur in the case that other creditors should make a claim on your property.
Absence of easement
You would take out this policy to cover you in the event that you do not have your neighbours written consent in order to access their land to get to your water pumps or drains. It will help you to appeal to buyers as it is an extra layer of security.
How much does an indemnity policy cost?
Every indemnity insurance is different so the amount that you pay will vary from policy to policy. Typically, the higher the level of the policy, the more expensive it will be. Costs can start from as little as £20 and go up to as high as £500. Non-regular policies can cost even more than this.
Can I transfer existing indemnity insurance?
Indemnity insurance policies are tied to the property, so they are transferable in the sense that they stay with the house regardless of the owner. When you purchase an indemnity policy, it is going to be more beneficial to buyers of your property.
When it comes to buying a property, a house with an indemnity insurance will be a lot more attractive than those that don’t. The one thing you will need to be aware of as a buyer of a property with indemnity insurance is as the property value rises, you may need to pay an additional premium in order to increase the cover.
Can I invalidate my policy?
If you have taken out a policy to help to protect you from a legal defect, you could find yourself invalidating it if you tell any third parties. A common clause that is written into most policies is that it will be invalidated if you mention the problem to any third party.
Who do I speak to about indemnity policies?
When it comes to purchasing indemnity, you should speak with your conveyancer or your solicitor. They can advise you on what policies your property may need, as well as the routes you can go down to purchase them.
You will often discover you need a form of indemnity insurance during the conveyancing stage if an issue has come to light during the surveys or because the seller cannot provide important paperwork or documents.
Do I need indemnity insurance for house?
Whether or not you need an indemnity policy is down to you. Your solicitor will be able to advise you, however, it is wise to do your own research before committing to a deal.
Indemnity insurance should be treated as a last resort as its point is to provide protection for an issue that cannot be easily fixed. You should be sure to check that the issue your property has cannot be fixed another way before you purchase the policy.
If you decide that you do need indemnity insurance, you should make sure your conveyancer is using a top-rated insurer to avoid being stung further down the line.
This covers everything you need to know about indemnity insurance for houses. If you have any further questions, queries, or insight into the matter, please feel free to get in touch!
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Alexandra is a junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.
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