Indemnity policy: Do I need one to sell?
Explaining what an indemnity policy is, how much it costs and whether or not you need it to sell your house...
If you’ve ever thought about selling your house, you may have come across the term ‘indemnity policy’ and wondered what this is, what it covers and how much it costs.
You may also have wondered if you need a policy of indemnity to sell your house and how beneficial it really is.
We’ve written a full guide here to answer all your questions, whilst also talking you through the costs of indemnity insurance and whether or not the policies are transferable.
What is indemnity policy?
An indemnity policy, also known as indemnity insurance, is something that can be purchased during house sales to cover the cost of any defect relating to a property.
It usually gives you as a seller some protection during the conveyancing process in the event that there’s a defect with the property that could lead to legal action further down the line.
A buyer can also take out an indemnity policy to protect themselves against any future problems associated with purchasing a property. This is normally recommended if you’re buying a property that is missing certain building regulation certificates, or if, for example, a seller can’t provide planning permission relating to an already built extension.
In this example, it would be advised that the buyer takes out a home indemnity policy to protect them against future losses or claims that could arise due to the missing documents.
What does an indemnity policy cover?
Of course, what your indemnity policy will cover will depend on the individual policy you choose to purchase, but in general your chosen policy will cover a range of potential risks.
The most common indemnity policies you may come across are:
Restrictive covenants – Often some properties, generally older properties, have something known as restrictive covenants which are written into the deeds and limit the use of the property in some way. For example, it could be there are restrictions over materials that should have been used in an extension build and these could have been breached. This indemnity policy covers the cost of any legal expenses or reduction in property value as a result of the breach
Indemnity for a boiler – If you’re unable to provide an installation certificate for your boiler when you’re selling your home, you could take out an indemnity policy to cover this. Alternatively, you could pay to get a gas safety certificate to give any potential buyers more practical reassurance about the safety of your boiler
Planning permission – If you have completed building work on your property and you don’t have evidence of planning permission, you should take out an indemnity policy to cover any potential costs that could arise, for either you or your buyer, as a result of a neighbour or the local council making a claim
Building regulations – This is similar to the planning permission indemnity policy but if there’s work that has been done on your property and there’s building regulation paperwork that is incorrect or missing, this policy would cover the cost of any work that may need to be altered
Chancel repairs – This policy of indemnity will protect any homeowner who lives near a church against the costs they will be liable for should the church need any repairs. This will help to make your home more appealing to potential buyers
Indemnity for windows – Since 2002, it has been a legal requirement in England and Wales to be provided with a FENSA certificate when you have new windows or doors fitted. If you’re missing this certificate, it’s a good idea to get a policy of indemnity to help appeal to potential buyers that they will be protected should your local authority take legal action if your window installation doesn’t comply with building regulations
Adverse possession – Adverse possession means the owner of the property only has the possessory title, meaning you may have claimed ownership of some land without having the necessary evidence to satisfy the Land Registry. In this situation, an indemnity policy will help make your house more appealing to buyers, as they will feel protected should someone try to claim the land back from them
Absence of easement – This indemnity policy covers you having access rights to a neighbour’s land should it be the only way you can access things like your drains or water pump. This will help your property appeal to potential buyers as they may raise concerns if you don’t have this access permission in writing
Absence of build-over agreement – This policy covers properties that have been built over or within three metres of a sewer without having a build-over agreement with the appropriate water authority. This will make your property more appealing to buyers as it will provide them with confidence that they don’t need to worry about any claims that could come against them
Insolvency – This particular indemnity policy will be more appealing to buyers, and maybe something you took out when purchasing your property, but if you purchased a property with help from another party, this policy would protect you against costs that you may incur should the other creditor try to make a claim on your property
Cost of indemnity insurance
The cost of indemnity insurance will depend upon the level and type of policy you wish to get. As you may expect, the higher the level of the policy and the higher the value of your property, the higher the cost of the policy.
An indemnity policy could cost as little as £20 to some that will cost as high as £500. Some non-regular policies will cost even more than this.
Insurance on the lack of planning permission or building regulation proof will cost between £200 to £500, whereas you will have to pay less for a chancel repair policy, costing between £50 to £200.
A home indemnity policy tends to be offered by more specialist providers and so you will need to do some in-depth research and look around to find the best price. You may also find that solicitors will charge an additional fee for organising your policy.
Are indemnity policies transferable?
Indemnity policies are transferable in that they’re tied to the property, so when you purchase an indemnity policy, in the long run, it’s going to be more beneficial to your buyer, as they will be protected by it.
As a result of this, a house which has a policy of indemnity on it will likely be more attractive to potential buyers.
The only detail a buyer may need to keep in mind is that if the value of the property rises, they may have to pay an additional premium to increase the cover. You won’t have to pay any additional fee to transfer the benefit of the policy onto your buyer.
Do I need indemnity insurance to sell my house?
A home indemnity policy can be a great way to appeal to potential buyers and speed up sales that could have otherwise been delayed by missing paperwork or regulations.
It’s worth bearing in mind, though, that getting an indemnity policy can be confusing and also quite costly, as you don’t just have to pay the cost of the policy, but also fees to the solicitor for their help in organising your policy.
It’s up to you whether the benefits of a less stressful sale outweigh the cons of the extra money you will have to pay for an indemnity policy.
Having said this, a hassle-free sale doesn’t always have to come at a cost…
Here at The Property Buying Company, we’re a cash buyer of houses, buying any property, in any condition and in any location. We’re a guaranteed cash buyer able to complete in a fast timescale of your choice.
Not only this, but we cover all the fees associated with selling a house – that’s right, no need to pay any legal fees around here!
We also handle the process for you, from start to finish, meaning all you need to do is give us a signature and we will do the rest! We will also keep you constantly updated on where we’re at in the process, as well as being completely honest about any issues we may face and how we will do our best to overcome them for you.
On top of this, with us buying any property, we’re not worried about your property having an indemnity policy because of missing paperwork, so there’s no need to worry about us being put off by that!
We’re members of the National Association of Property Buyers and The Property Ombudsman so you can rest assured you, as the seller, are protected. We’re also rated excellent on Trustpilot with over 1,000 reviews – we’re a tried, tested and approved ‘quick cash for house’ buyer.
Ready to get a quick, hassle-free sale without the costs and stress of an indemnity policy? Give us a call or fill in our online form for a no-obligation cash offer to discover the amount you could receive in FULL in your bank in a timescale of your choice!