As you will come to experience – if you haven’t already – the road to buying a property is not always a smooth one, and you can occasionally encounter a few bumps along the journey to owning a house. An indemnity insurance, however, can make the process of acquiring property less tumultuous and will safeguard you against unwanted additional costs that may be revealed within the property.
What is indemnity insurance?
An indemnity insurance is a protection and security policy that can be purchased when acquiring a property. The one-time payment policy will cover the costs of any claims made by a third party in relation to defects with the property you have acquired. If for instance your conveyancing solicitor realises that the seller of the property cannot provide key documentation linked to the property itself, such as for instance planning permission documentation for an extension they built or alternatively a building regulation certificate, this could lead to future problems if your neighbour or even the council chooses to challenge the extension. Once you acquire the property any proprietary responsibilities will be yours, however acquiring an indemnity insurance when buying the property can offset or void any costs related to legal claims or value loss that could result from the issue. Thus, in summary, indemnity insurance will offer protection to the buyer, in the case that there is a fault in the property title that cannot be resolved, once the property has been purchased.
What doesn’t indemnity insurance cover?
It is important to mention that an indemnity insurance policy will not however cover the repair or replacement cost of something within the property itself. In other words, if you were to have acquired the policy as you were not provided with an installation certificate for the boiler, the indemnity insurance would not cover for the repair or replacement of the boiler. It would however cover the costs of any claims made against you, for instance by the council, for not having an installation certificate. Ultimately, an indemnity insurance will cover any claims that involve legal issues to do with the property and that would usually be very costly or time consuming to resolve. It is in effect a preventative measure, where you take out an indemnity insurance rather than trying to find and solve the issue, to protect yourself against a large, unexpected and evidently unwanted bill further down the line.
Why should I get indemnity insurance?
There are a number of reasons why property buyers will take out indemnity insurance, and most often the indemnity insurance will cover that specific issue, rather than being an all-inclusive policy, meaning that you may need to get indemnity insurance cover for a number of things. These include issues with planning permission for a property, especially when there is limited or no documentation to support and permit the construction of the existing extensions. Another reason why one would get indemnity insurance is in relation to there being no paperwork to support the fact that the building regulations are up to standard – here the indemnity insurance would be able to cover the cost of correcting the matter. Furthermore, an indemnity insurance policy will resolve issues that may arise from missing deeds or Land Registry documents for your property. In addition, indemnity insurance can be useful for window installation. In England and Wales, you are required to be issued with a FENSA certificate when windows are installed, however if you are missing this document getting an indemnity insurance policy will protect you against losses if action is taken by your local authority in the case that the window installation does not comply with building regulation. Finally, the policy will also cover the legal costs that could come up if anyone were to make a legal claim against you in connection to land you own.
Unlike other insurance policies, indemnity insurance is a one-off payment, therefore although there may not be a monthly fee stretched over a fixed timeframe, your one and only payment can be a considerable sum, depending on the provider as well as the cover that you choose within the policy. Additionally, the size of the property as well as its condition will likely affect the price of the policy. This type of insurance is very specific, so it is rather challenging to find a fixed quote or price range on the internet, though a financial adviser or mortgage broker will be able to put forward the best deal available to you with a price that will usually range between £50-300 per claim.