If you’re buying a home, you’ve likely been encouraged to take out an indemnity policy, and with good reason. This type of insurance can protect you against many things that can go wrong with the property sale itself and well into the future. What is indemnity insurance, though, and how can it benefit your home buying experience?
A Quick Definition
Indemnity insurance is a policy that requires a single payment. Once you’ve made that payment, it covers the potential for problems well into the future. It is typically written to cover a specific potential problem. For example, as a buyer, if you’re concerned because the seller can’t offer you a building regulation certificate, an indemnity policy can help to cover any costs you might have that are associated with that problem if the local authority pursues a claim against you in the future because you lack the right paperwork.
The Benefits of an Indemnity Policy
There are many different reasons you might want to consider this type of insurance. One of the most important, though, is the fact that your home is your biggest investment in most cases, and it’s not a risk-free investment, either. Indemnity insurance helps to make it a bit less risky because if you’re buying a home and you come across a problem, this type of insurance makes it possible to move ahead with the purchase, even if there are problems. It can be a far quicker option than trying to get repairs made before the sale of the home actually goes through.
Some Potential Concerns
So, exactly what can an indemnity policy cover? Almost anything. Here are a few of the most common types of policies.
- Planning Permission: Sometimes a seller can’t prove that they got planning permission for a given project around the house. That could be an extension or another type of project. Either way, an indemnity policy would cover future costs should the local Council get concerned about that project.
- Building Regulations: If the home you’re buying doesn’t have a building regulation certificate, you could be in real trouble if a local authority goes to make a claim against you. Fortunately, though, with an indemnity insurance policy, you won’t have to worry about it.
- Missing Documentation: Deeds, Land Registry Documents, and many other documents about a property could go missing. A number of legal issues can come up in relation to those problems, and indemnity policies are designed to handle your related expenses to those issues.
The Cost of Indemnity Insurance
Wondering how much a policy like this might cost you? It depends on the policy itself. Some are as cheap as £20. Others, however, are quite pricey, coming in at £1,000 or more. The give you the best quote, your insurer will look at exactly what things you want to be covered in the policy as well as the overall value of the property itself. From there, they’ll be able to issue you a quote.
While indemnity policies are a one-off expense, that doesn’t mean you actually have to pay it. Instead, if you have concerns about the property you’re buying, you can typically negotiate with the seller to get them to cover the cost of the indemnity policy. Often, they’re willing to pay for that so nothing goes wrong with the sale of their home moving forward. If you’d prefer to cover the cost yourself, however, that’s an option as well. It’s up to the two of you to decide how best to handle the cost of the policy.
How Long Does It Last?
Indemnity insurance doesn’t expire until you sell your property. For that one-time payment, the issue you’ve chosen to have covered will be covered until either you make a claim against the policy because the problem you were concerned about has come to pass or it will be covered until you sell the property to someone else. It is possible for an indemnity policy to get passed on to another buyer, too, but you’ll need to chat with your insurance broker and you may need to have a valuation on your house to prove its worth is at least similar to what it was when you bought it.
Indemnity insurance policies are a great way to protect you as a buyer. Chat with your broker to see if one might help in your home sale.