The Essential Guide to Indemnity Insurance in Property Transactions.

What is Indemnity Insurance?

Indemnity insurance is a policy taken out during property transactions to protect buyers and sellers from legal and financial issues related to property defects. If a survey or property search reveals a problem that could jeopardize the sale, an indemnity policy can cover future claims or loss of value from that defect.

Why Haybrook Recommends Indemnity Insurance

We recommend indemnity insurance to protect you during property transactions. This insurance covers potential problems that might affect the sale, such as missing certificates for boiler installations or undocumented building work. These issues often involve minor paperwork gaps, but indemnity insurance provides peace of mind by covering any related risks.

Indemnity insurance protects against future legal actions and financial losses due to property defects. While it doesn’t cover the cost of fixing the defect itself, like replacing a faulty boiler, it does cover legal costs and claims from third parties. This means if a problem arises later, you’re protected from major financial and legal troubles.

For example, if a survey shows that previous alterations were made without planning permissions, indemnity insurance can cover the legal costs and claims that might come from this. It also protects against issues like missing building regulations certificates, ensuring you aren’t financially burdened by enforcement actions.

How Much Does Indemnity Insurance Cost?

The cost of indemnity insurance varies based on the type of coverage and the financial limit required. Generally, policies cost several hundred pounds, paid as a one-off premium. Factors influencing the cost include the nature of the defect and the coverage amount needed.

Typically, the seller pays for indemnity insurance since the issues usually originate from their property. The seller has a vested interest in resolving any potential problems to avoid jeopardizing the sale. However, in some cases, the cost might be shared or negotiated between the buyer and seller.

Different Types of Indemnity Insurance:

Restrictive Covenant Insurance

If there's a restrictive covenant on the property that was previously breached, this insurance covers any resulting financial implications. Restrictive covenants restrict certain activities on the property and are detailed in the property deeds.

Planning Permission Insurance

This type of indemnity insurance covers alterations made without the necessary planning permissions or missing building regulation certificates. It ensures that any legal repercussions of unauthorized changes are financially covered.

Boiler Indemnity Insurance

Sellers who lack the installation certificate for their boiler may need indemnity insurance to cover potential safety claims from buyers or future owners. However, obtaining a gas safety certificate first is advisable.

Window Indemnity Insurance

Properties with windows installed or replaced since 2002 should have a FENSA certificate. If the seller cannot provide this certificate, indemnity insurance protects against enforcement actions claiming non-compliance with building regulations.

Chancel Repair Insurance

Certain properties near churches may be liable for chancel repairs. Indemnity insurance covers these potential costs, revealed during property searches.

Absence of Easement Insurance

This insurance covers any loss of property value due to the absence of easement rights—permissions needed from neighbouring landowners for access to your property.

Insolvency Insurance

If buyers have received financial help for their deposit, indemnity insurance can protect against claims from creditors if the financial helper faces insolvency.

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Understanding indemnity insurance can make a significant difference in your property transaction experience. Register for property alerts to stay updated on new listings that meet your criteria. Contact us today for personalized advice and support or visit your local branch.