A guide to property indemnity insurance

What is property indemnity insurance?

In very simple terms it’s a type of insurance that protects a future homeowner from future problems with the property they are buying, including legal issues about aspects of the home or action by a local council against the building for lacking a necessary certificate.

Indemnity refers to a contractual agreement in which one party agrees to compensate for losses that another party suffered. When it’s used in the property buying market, indemnity insurance generally refers to having an insurance policy in place that lasts forever and covers any costs that a buyer might face as a result of an existing problem with a property they’re buying.

The insurance policy helps cover against problems in the title deeds, which combine all the various legal and other documents about the house and its history. That’s why it’s important for homeowners to know where the title deeds are, or take steps to get new copies.

It’s not mandatory to get indemnity insurance when buying a house, and it’s typically needed only in situations where a solicitor recommends that a policy be bought.

What does property indemnity insurance typically cover?

Indemnity insurance helps to protect against potentially very expensive problems with a property, or issues that might take a lengthy amount of time to resolve. Having a policy in place means the buyer won’t have to tackle the issue on their own.

Missing planning permission – Some homeowners make extensions or other alterations to their properties without getting the necessary planning approval from their local council. Indemnity insurance would protect a future buyer from any legal action that the council might try to pursue against the house or flat for not having the right planning approval.

Restrictive covenants – These are agreements in the deeds of homes that impose some type of limit on how the property can be used, for example a requirement to give certain people access to something on the land. Indemnity insurance provides sufficient protection for a buyer if a future breach of the restrictive covenant leads to any legal problems.

Problems with windows – Houses and flats in England and Wales that have new windows installed must get what’s known as a FENSA certificate. FENSA on its website describes itself as a government-authorised scheme that monitors building regulation compliance for replacement windows and doors. Indemnity insurance covers a buyer if the previous owner never obtained the necessary FENSA certificates.

How expensive is indemnity insurance?

There’s no set rate for property indemnity insurance, but you could expect to pay from as low as £25 up to several hundred pounds depending on the value of the house and what the policy is designed to cover. But this is a one-time expense as the policy will last forever.

Buyers and sellers typically negotiate over who is liable for paying the indemnity insurance costs, so if you are involved in a sale this is something that you will have to resolve.