If purchasing or selling a home, your conveyancing solicitor may recommend that you get indemnity insurance, which is a type of insurance that offers protection coverage that is often bought during real estate transactions. It covers you against the financial consequences of a third party filing a claim against you for any faults in the property you will purchase.
An indemnity insurance policy, in other words, protects you against a particular possible issue with a property that may result in financial losses in the future. Suppose you are purchasing a home and the seller is unable to produce a building regulation certificate. Your conveyancing solicitor may recommend that you take out indemnity insurance to cover any possible expenses. Therefore, that will cover any expenses that may arise in the future if your local government decides to pursue a claim against you because you do not have a certificate on hand. However, it is essential to remember that indemnity insurance will not cover the expense of repairing or replacing anything.
How Does Indemnity Insurance Cover Work?
It is possible to get indemnity insurance for a legal defect with a property that is either unresolvable or very expensive and time-consuming to address. In this case, instead of attempting to correct the issue, you get indemnity insurance to protect yourself against incurring a considerable cost in the future. The majority of the items covered by indemnity insurance are shallow risks, but they would be costly if they did occur.
Consult with your conveyancer or solicitor before getting indemnity insurance. They can provide insight on whether or not this kind of insurance will provide you with the protection you need to continue with your home relocation. Frequently, it will be your conveyancing solicitor who will contact you about a problem that has either been discovered as a consequence of the building surveyor due to the seller's failure to submit specific documentation or certifications during the closing process.
Popular Indemnity Policies
Indemnity Insurance for Restrictive Covenants
This is a kind of insurance that protects the parties that enter into a restrictive covenant.
Some older properties include clauses in the deeds that restrict the use of the property in some manner, known as restrictive covenants. It may be that you cannot maintain cattle or that you are required to provide your neighbors with access to a well. Even if past owners have violated the covenant, you may still get indemnity insurance to protect yourself. It will safeguard you if the breach creates issues in the future.
Window Indemnity Insurance
When new windows or doors are fitted, the fitters should give you a FENSA certificate to prove their work. Since 2002, this has been a legal requirement in England and Wales, and it certifies that building standards have installed them.
Obtaining an indemnity policy is standard practice if you miss FENSA certificates because your window installation does not comply with building regulations. This policy will protect you against any losses you incur if your local authority takes enforcement action against you because the window installation does not comply with building regulations.
Indemnity Insurance for Obtaining Planning Approval
If a former owner makes modifications to the home without obtaining planning approval, you may be able to get compensation via indemnity insurance. That would protect against the possibility of local government enforcement. This kind of indemnification may also be helpful if building regulations certifications are not present.
Buyers should also consider getting a survey since building regulations certifications are not present in this case. Inform the surveyor of the problem and ask them to ensure that the construction work is structurally secure.
Boiler Indemnity Insurance
If you are selling your house and cannot produce an installation certificate for your boiler, you may be able to get indemnity insurance to cover the cost of the boiler. If you do decide to sell your boiler, you should consider obtaining a gas safety certificate beforehand. That will provide more practical confidence to your buyer regarding the boiler's safety and save you from paying out for indemnity insurance.
Similarly, if you are purchasing a boiler, it is critical to verify that it is safe. Don't settle for indemnity insurance as a substitute. The indemnity insurance policy will not cover the cost of repairing or replacing the boiler.
That is the point at which you must cross someone else's property to get to your own. The loss of value is protected by indemnity insurance if you do not have a 'right of easement' or permission to pass across the property in question.
Cost of Indemnity Insurance Coverage
The cost of indemnity insurance varies from company to company. The premium you pay will be influenced by the value of your property and the coverage provided by the policy. A one-time insurance policy to protect against the possibility of chancel repairs may cost you a few hundred dollars. However, an indemnity to cover construction work that does not have the proper certifications may cost several hundred pounds in certain instances. In most cases, indemnity insurance costs between £20 and £300 per year.
Unfortunately, this is one insurance policy for which you will not be able to shop around for a better price on the internet. Specialized insurance companies provide indemnity insurance. As a result, your solicitor or conveyancer will provide you with a quotation.
Who Should Bear the Financial Burden?
That is something that you can negotiate. Because indemnity insurance benefits the new owner, there is a compelling case for the buyer to bear the insurance cost. Several residences have problems that have existed for years. Every new owner will do a thorough risk assessment and determine whether or not they need the additional protection of indemnity insurance.
The problem may have been caused by something that the current owner did not perform correctly. In this particular instance, there is a compelling justification for the seller to pay the insurance premium. In other cases, discussions result in a cost-sharing arrangement. Typically, however, since the insurer is correcting an issue that might prevent the transaction from going through, the seller is responsible for the repair cost.
Transfer of an Existing Policy to a New Owner
You may have purchased indemnity insurance, but it is linked to the property in which you live. That implies that you may transfer ownership to new owners, who the agreement will protect. However, if the value of your property rises, you may be required to pay an extra payment to enhance the coverage. When transferring the benefit of coverage to a new owner, there are no fees to pay.
If your conveyancing solicitor recommends that you buy indemnity insurance, take the time to inquire what it is intended to protect against you. Consider doing some of your research as well. Indemnity insurance is often used as a last option to offer protection in a situation that you cannot resolve quickly. Make sure there isn't a free method to fix the issue before putting your hand in your pocket to avoid this situation. Instead of opting for the 'Elastoplast option of indemnity insurance, it is always preferable to correct the underlying legal flaw rather than relying on it.
Are you looking for a reliable conveyancer to guide you in your buying or selling journey? Conveyancing Calculator can assist you in comparing conveyancing quotes from licensed conveyancing experts. Know your pricing and procedures ahead of time to get an advantage in your purchasing and selling operations. Feel free to drop us a message or give us a call today!