Understanding Indemnity Insurance
Indemnity insurance is a type of coverage sometimes required during property transactions. If a survey or search reveals an issue that could jeopardize the sale, this insurance protects the buyer or seller from future financial loss or legal action related to that problem.
Why Might Your Solicitor Request Indemnity Insurance?
Solicitors may recommend indemnity insurance if they identify a potential issue with the property that could impact the sale. For example, if the seller can't provide a certificate for their boiler installation or evidence of planning permission for past modifications, insurance might be necessary. This usually pertains to missing paperwork or minor issues that pose a low risk.
What Does Indemnity Insurance Cover?
Indemnity insurance doesn't cover the cost of fixing the issue itself, like replacing a faulty boiler. Instead, it covers the legal costs if a third party makes a claim related to the problem in the future.
How Much Does Indemnity Insurance Cost?
The cost varies depending on the type of indemnity needed and the coverage limit. Generally, you can expect to pay several hundred pounds, with premiums being paid as a one-time payment.
Who is covered by Indemnity Insurance?
Both buyers and sellers are protected by indemnity insurance, the coverage lasts for the property's lifetime, ensuring long-term protection.
Who Typically Pays for Indemnity Insurance?
Usually, the seller pays for indemnity insurance because the issue or defect is with their property. They have more to lose if the sale doesn't go through due to these problems.
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Common Types of Indemnity Insurance
Here's a look at the most common types of indemnity insurance you might encounter:
Restrictive Covenant Insurance
If your property has a restrictive covenant that has been breached by a previous owner, indemnity insurance covers any financial consequences. These covenants limit specific activities on the property and are detailed in the property deeds.
Planning Permission Insurance
If alterations to the property were made without the necessary planning permissions or in violation of existing regulations, indemnity insurance can provide coverage. This also applies to missing building regulation certificates for past work.
Boiler Indemnity Insurance
If the seller can't locate the boiler's installation certificate, indemnity insurance can cover claims related to the appliance's safety. However, obtaining a gas safety certificate first is a good step to assure buyers of the boiler's condition.
Window Indemnity Insurance
For windows installed or replaced since 2002 without a FENSA certificate, indemnity insurance can protect against enforcement by local authorities for not meeting building regulations.
Chancel Repair Liability
Some properties near churches have a historical obligation to contribute to chancel repairs. Indemnity insurance covers these potential costs if such a responsibility is identified during property searches.
Absence of Easement Insurance
If a property lacks the legal right (easement) to cross another's land for access, indemnity insurance can cover any loss of value or issues arising from this.
Insolvency Insurance
If a buyer has received financial help for their deposit and the lender is concerned about the risk of insolvency of the donor, indemnity insurance can protect against creditor claims.
Stay Ahead with Property Alerts
While indemnity insurance is a niche concern, it's crucial to understand if your solicitor mentions it. To stay ahead in your property search, register for property alerts with Chewton Rose and be the first to know about new and off-market homes in your area.
