Buying or selling a house is rarely straightforward, and sometimes small issues like missing paperwork crop up that risk delaying the residential property conveyancing process. One common way solicitors deal with these problems is by arranging something called indemnity insurance.
Indemnity insurance doesn’t fix the problem itself, but it gives you and your mortgage lender financial protection if the issue ever causes difficulties in the future. It’s a quick and cost-effective solution that often keeps a sale moving when it might otherwise grind to a halt.
What is indemnity insurance?
Indemnity insurance is a specialist type of legal cover used in property transactions. It’s arranged as a single policy, paid for once, and then it lasts for the lifetime of your ownership.
It is usually organised by the solicitor handling your transaction. They’ll spot the issue, suggest the right type of policy, and arrange the cover directly with an insurer so that everything is in place before completion.
Unlike standard home insurance, it doesn’t protect against damage to the building itself. Instead, it protects you against potential legal or financial claims connected to an issue with the property.
For example: if a legal defect with the property or missing paperwork later led to a legal claim, the policy will cover the risk of financial loss or even a loss of value of your home.
When might you need indemnity insurance when buying a house?
Missing Building Regulation Certificates
Perhaps the property has a loft conversion, new windows, or an extension, but the seller doesn’t have the completion certificate from the local authority. Indemnity insurance protects you if the council ever questions the work in the future. This is one of the most common indemnity situations, especially where historic building work can’t be certified.
Issues with the Property Title
If you are buying a house with title problems like unclear rights of way, restrictive covenants, or gaps in historic ownership records, indemnity insurance provides financial cover should a dispute arise later.
Chancel Repair Liability
In some parts of England and Wales, homeowners can be liable for the upkeep of the local parish church. It’s an old law that still exists in certain areas. If a search suggests the risk exists, indemnity insurance can cover any future claim.
Unauthorised Alterations
This issue is about planning permission rather than building regulations. If major changes have been made to the property, for example, a large extension or converting part of the house into a separate flat, but no planning consent was obtained, the local authority could, in theory, take enforcement action.
Applying for retrospective planning permission is sometimes possible, but it can take months and put the whole transaction at risk. In most cases, taking out an indemnity policy is the practical option. It doesn’t “fix” the missing permission, but it does give financial protection so the sale can go ahead without delay.
How much does indemnity insurance cost?
Taking out indemnity insurance is a one-off cost, and you’re charged when the policy is set up. Premiums vary depending on the risk and the value of the property. Some straightforward policies cost as little as £20-£30, while others can run into several hundred pounds if the issue is more complex.
Who pays is often a matter of negotiation. In many cases, the seller agrees to cover the premium to keep the sale moving, especially if the risk stems from missing paperwork or unauthorised works on their side. Other times, the buyer may pay as part of their legal costs for the transaction. Your solicitor will advise you on what’s usual in your circumstances.
For most buyers, purchasing indemnity insurance is a small price to pay for peace of mind and a smooth completion compared to the risk of delays, disputes, or financial exposure further down the line.
How long does indemnity insurance last?
One of the advantages of indemnity insurance is that it doesn’t run out. Once the policy is in place, it lasts indefinitely and stays with the property rather than the person who paid for it. That means if you later sell the house, the cover usually continues for the benefit of the new owners and their mortgage lender, too.
There are no renewal dates or ongoing premiums to worry about. It’s a single payment at the point of purchase, and the protection remains in force indefinitely. This makes it a straightforward and cost-effective way of resolving issues that might otherwise block a transaction.
Does indemnity insurance replace legal advice?
Indemnity insurance is never a substitute for proper legal checks. Your solicitor will always carry out searches and investigations to uncover issues with the property. If something comes to light that can’t easily be fixed, they may then recommend indemnity insurance as a practical solution.
Think of it as a safety net rather than the main process. The legal work makes sure your purchase is sound and that you understand exactly what you’re buying. The insurance simply steps in where the law doesn’t provide an easy fix, giving financial protection if the risk ever becomes a problem. It also reassures lenders that repayments on your mortgage are secure, reducing the risk that your home or property may face enforcement action.
Concerned you might need an indemnity insurance policy?
If you’d like advice on indemnity insurance, or any part of the conveyancing process, our team is here to help. We’ll talk you through your options in plain English and handle all the arrangements so you can focus on the excitement of moving into your new home.
Contact us today, and we’ll explain exactly why you might need an indemnity insurance policy, what it covers, and who should pay for it. We’ll make sure you feel confident about the decision and that everything is in place before you complete.
FAQs About Indemnity Insurance Cover
Is indemnity insurance always necessary?
Not every property needs indemnity insurance. It’s usually only suggested when a specific legal issue is discovered during the conveyancing process that can’t easily be resolved in time. If all the right documents and permissions are in place, you may never hear of it.
When something is missing or uncertain, there are a few possible routes:
- Try to find the missing paperwork – for example, applying to the local authority for a copy of a completion certificate. This can take weeks or even months.
- Ask the seller to rectify the issue – perhaps by applying retrospectively for planning permission or building regulation approval. This is possible in some cases, but it’s often lengthy and can delay the whole chain.
- Negotiate on price or contract terms – sometimes a buyer and seller will agree to adjust the purchase price to reflect the risk instead of arranging insurance.
Because these alternatives can cause delays or uncertainty, indemnity insurance is often the quickest and most practical solution. Your solicitor will explain whether it’s genuinely needed or if one of these other options makes more sense.
Can indemnity insurance be passed on to the new owner?
Indemnity insurance is linked to the property rather than the individual buyer or seller who arranged it.
That means when the property changes hands in the future, the policy usually remains in place to cover the new owner and their mortgage lender, too. This continuity helps reassure future buyers that the issue has been dealt with and makes the property easier to sell again.
Does indemnity insurance affect my ability to get a mortgage?
Indemnity insurance usually helps rather than hinders your mortgage application. Many lenders will not release funds for the mortgage on the property unless the relevant indemnity insurance is in place. This way, indemnity insurance protects your investment and the lender’s position.
If your solicitor identifies a problem, arranging a policy is often the quickest way to satisfy the lender and keep the mortgage moving.
Can indemnity insurance ever be refused?
Insurers will usually not cover a problem that has already been raised with the local authority or another third party.
For example, if a council has been asked about missing planning permission or building regulation approval, the risk is considered “known” rather than “potential.”
In that situation, indemnity insurance can’t be used, and other solutions (like applying for retrospective approval) may be necessary instead. This is why it’s important to take advice from your solicitor before contacting outside bodies, so you don’t accidentally close off the option of arranging a policy.