When selling a house, unexpected issues can sometimes slow down the process or create uncertainty for buyers. One way to avoid potential legal or financial problems is by taking out indemnity insurance. But is it always necessary, and what does it actually cover?

Indemnity insurance is often recommended by solicitors when there is a risk of future liability related to the property. It provides protection against specific legal issues that could otherwise cause delays or even derail a sale. In many cases, a one-off payment secures the policy, which then remains in place for the new owner and any future buyers.

What Is Indemnity Insurance?

Indemnity insurance is a policy that provides cover for homeowners when certain legal or structural issues with a property cannot be easily resolved.

It is usually suggested by a solicitor when there is a risk that a buyer (or future buyers) might face financial loss due to a problem that has not been properly documented or approved. Instead of spending time and money fixing the issue, indemnity insurance allows the sale to go ahead while offering protection against future claims.

This type of insurance is typically paid for with a one-off premium at the point of sale. The policy then stays with the property, covering the buyer and any future owners.

What Does Indemnity Insurance Cover?

Indemnity insurance is designed to protect against legal or administrative issues with a property that cannot be easily resolved. These problems are often too costly or time-consuming to fix, making it difficult to sell the property without some form of protection.

One common issue covered by indemnity insurance is the lack of planning permission for alterations or extensions. If work has been carried out without approval from the local authority, there is a risk that enforcement action could be taken. Instead of trying to obtain retrospective consent, which can be complicated, an indemnity policy provides protection against any future claims.

Another situation where indemnity insurance may be used is when building regulations certificates are missing. If a previous owner made structural changes or installed a new boiler or windows without the correct approvals, this could cause problems during a sale. The policy reassures the buyer and lender that they are protected against potential legal action.

In some cases, a property may be affected by old legal agreements, such as restrictive covenants. These can set rules on how a property can be used, and breaching them could lead to legal consequences. Indemnity insurance covers the risk of enforcement if the covenant has been unknowingly broken.

Disputes over access rights can also be a concern, particularly if a property has been built over land without official permission. If this becomes an issue, indemnity insurance can offer protection against legal challenges.

Rather than attempting to resolve these problems, which may not always be possible, indemnity insurance allows the sale to go ahead while giving the new owner peace of mind.

Indemnity Insurance Cost

The cost of indemnity insurance depends on the type of issue being covered and the value of the property. Some policies are inexpensive, while others can be more costly if they relate to complex legal matters.

For straightforward cases, such as minor legal defects or missing paperwork, prices generally range from £20 to £300. More specific policies, like chancel repair indemnity insurance, can cost as little as a few pounds, as the risk of a claim is relatively low. However, policies covering more serious concerns, such as missing safety certificates or building regulation breaches, can be significantly higher. In some cases, they may reach into the thousands, especially for high-value properties or issues that could result in legal disputes.

Since indemnity insurance is usually a one-off payment, it does not require ongoing premiums. The cost is typically covered by the seller, but in some cases, buyers may agree to pay or share the cost as part of the negotiation process.

Indemnity Insurance Policy

Indemnity insurance is a one-off policy that stays with the property rather than the homeowner. Once in place, it provides cover for the buyer and any future owners, ensuring protection remains even if the property changes hands multiple times.

If the property is being purchased with a mortgage, the policy will also extend to the lender. Mortgage providers often require indemnity insurance in cases where legal uncertainties could pose a financial risk, such as missing documents or planning permission concerns.

The policy is paid for with a single premium at the time of sale, meaning there are no ongoing costs. While the seller typically arranges it, there may be instances where the buyer agrees to cover the cost as part of the purchase agreement.

Importance of Indemnity Insurance Cover

Indemnity insurance can help smooth the process of selling a property, particularly if there are unresolved legal or administrative issues. Buyers may be hesitant to proceed with a purchase if a property has missing paperwork, planning concerns, or other complications. Having an indemnity policy in place can reassure them and prevent unnecessary delays.

For sellers, this type of insurance can make a property more appealing, especially if past alterations were made without the correct permissions or if essential certificates are missing. Rather than having to fix these problems, which can be expensive and time-consuming, an indemnity policy allows the sale to move forward with less hassle.

Lenders may also take comfort in the presence of indemnity insurance, as it reduces the risk of legal disputes that could affect the property’s value. In some cases, having a policy in place may even be a requirement for securing a mortgage.

By removing obstacles that could otherwise complicate the sale, indemnity insurance can speed up the process and give buyers more confidence in their purchase.

How to Obtain Indemnity Insurance

Indemnity insurance is typically arranged through a solicitor or conveyancer during the property sale process. If a legal issue is identified, they can recommend a suitable policy based on the specific problem and the level of cover required.

Specialist insurance providers also offer indemnity policies, and it may be possible to arrange one directly. However, most buyers and sellers rely on their solicitor to handle this, as they have access to insurers that specialise in property-related risks.

Since prices and coverage can vary, it is worth comparing quotes from different insurers to find the best deal. Solicitors often have preferred providers, but you are not obliged to go with their recommendation. Checking multiple options can help ensure you are getting a fair price for the cover you need.

Alternatives to Indemnity Insurance

While indemnity insurance is often the simplest way to deal with legal or administrative issues when selling a property, there are alternatives that may be worth considering.

In some cases, it may be possible to resolve the issue directly. For example, if planning permission was not obtained for an extension, applying for retrospective consent from the local authority could be an option. Similarly, missing building regulations certificates might be replaced if the work can be inspected and approved.

Another approach is to negotiate with the buyer. Some buyers may be willing to proceed without indemnity insurance if they feel the risk is low or if the issue can be addressed after purchase. This could involve reducing the sale price to account for any potential costs the buyer may face in the future.

However, resolving these problems can take time and may require extra paperwork, legal fees, or building work, all of which could delay the sale. In many cases, indemnity insurance remains the quickest and most cost-effective solution, particularly if a mortgage lender requires it before approving a loan.

Impact of Indemnity Insurance on Property Value

Indemnity insurance does not usually increase or decrease the market value of a property. Instead, its main benefit lies in helping a sale progress more smoothly by addressing concerns that might otherwise cause delays or uncertainty for buyers.

When a property has legal or administrative issues—such as missing planning permission or building regulation certificates—buyers may hesitate or even pull out of a purchase. Indemnity insurance provides reassurance, making the property more appealing by offering protection against potential risks. This can be particularly useful in cases where fixing the issue would be costly or time-consuming.

By reducing complications, indemnity insurance can also help speed up the sale process. While it doesn’t directly influence the price, a quicker and smoother sale may result in fewer negotiations or price reductions caused by buyer concerns.

Indemnity Insurance and Property Sales

Indemnity insurance can help prevent legal or administrative issues from delaying or disrupting a property sale. If a problem such as missing paperwork, a lack of planning permission, or a restrictive covenant is discovered during the conveyancing process, buyers may become hesitant, and mortgage lenders might refuse to proceed. Having an indemnity policy in place can provide reassurance and allow the sale to continue without lengthy legal battles or expensive remedial work.

For buyers, indemnity insurance offers peace of mind by reducing the risk of unexpected legal claims or financial losses related to the issue covered by the policy. This can make a property more appealing, especially in cases where uncertainties could otherwise cause concern.

By resolving potential sticking points, indemnity insurance can also speed up the sale process. Instead of lengthy negotiations or costly fixes, a one-off payment secures cover and allows the transaction to move forward with greater certainty for both parties.

Common Misconceptions About Indemnity Insurance

Many people assume indemnity insurance works in the same way as home insurance, but it is a completely separate type of cover. While home insurance protects against damage or loss caused by events such as fire, flooding, or theft, indemnity insurance is designed to cover legal risks linked to a property.

Another common misunderstanding is that indemnity insurance is always required when selling a property. In reality, it is only needed in specific situations where a legal issue could cause difficulties for the buyer or their mortgage lender. If there are no outstanding concerns, there is no need to take out a policy.

Some also believe indemnity insurance is a way to fix underlying problems, but this is not the case. It does not correct issues such as missing planning permission or a lack of building regulations approval. Instead, it provides financial protection if a claim is made in the future. The issue itself remains, but the insurance ensures that any legal or financial consequences are covered.

While indemnity insurance can be useful in certain cases, it is not a one-size-fits-all solution. Understanding what it covers—and what it does not—can help sellers and buyers make informed decisions.

Indemnity Insurance for Specific Property Issues

Indemnity insurance is not a single, all-encompassing policy but rather a range of policies tailored to different legal risks. The type of cover needed depends on the specific issue affecting the property.

One of the most common types is building regulations indemnity insurance, which covers costs linked to unauthorised or unregulated work. If alterations have been made without the necessary approvals, local authorities could take enforcement action. This policy provides financial protection if such a situation arises.

Another example is chancel repair liability indemnity insurance, which applies to properties located near certain parish churches. In some areas, homeowners can still be held legally responsible for contributing to church repairs—a requirement that dates back centuries. While the risk of enforcement is low, this type of policy ensures that the owner is covered if a claim is made.

Restrictive covenant indemnity insurance is designed to protect against legal restrictions placed on a property. Some homes, especially older ones, may have covenants that dictate how they can be used or altered. If these restrictions have been breached, or if their wording is unclear, indemnity insurance can prevent legal complications.

Different policies exist for other risks, including rights of way disputes, missing title deeds, and planning permission concerns. The right policy will depend on the nature of the issue and the level of risk involved.

Choosing the Right Indemnity Insurance Provider

Selecting the right indemnity insurance policy involves more than just finding the lowest price. Different policies provide varying levels of cover, and not all insurers offer the same protection for every type of issue.

Before purchasing a policy, it is important to check exactly what is covered and whether any exclusions apply. Some policies may have limitations that could affect how useful they are in practice. For example, certain indemnity policies may not cover future alterations to the property or may exclude claims from specific parties. Understanding these details can prevent unexpected complications later.

Comparing quotes from multiple insurers is also worthwhile, as costs can vary depending on the provider. Solicitors often recommend a particular insurer, but sellers are not obligated to go with their suggestion. Checking with different companies can help secure a better price while ensuring the policy provides suitable cover.

Ultimately, choosing a reputable insurer with experience in property-related risks can provide greater peace of mind, ensuring the policy remains reliable should a claim ever arise.

Conclusion

Indemnity insurance can be a useful tool when selling a property, particularly if legal or administrative issues might otherwise cause delays or deter buyers. While it does not fix underlying problems, it provides protection against potential claims and reassures both buyers and mortgage lenders.

Not every sale requires indemnity insurance, but in cases where documents are missing, planning permission is uncertain, or legal restrictions are unclear, it can help keep the process moving without the need for costly or time-consuming solutions. Since it is a one-off payment that stays with the property, it offers long-term protection for future owners as well.

Before taking out a policy, it is worth checking whether the issue can be resolved directly or whether an alternative approach might be more suitable. If indemnity insurance is the best option, comparing policies from different providers can help secure the right level of cover at a reasonable price.

For sellers, having the right indemnity policy in place can make a property more appealing and prevent unnecessary complications. For buyers, it provides peace of mind, ensuring they are not left facing unexpected legal risks after completing their purchase.