Do you need Indemnity Insurance?

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Your property purchase is likely to be the biggest financial transaction you’ll ever make and it isn’t something that’s completely risk-free, which can make the whole process very stress-inducing to say the least!

Because of the amount of anxiety attached to such a huge transaction, insurance companies offer a product called property indemnity insurance for buyers, which gives protection to cover buyers against a range of risks that could potentially crop up. If you have a conveyancer, they might suggest indemnity insurance for a particular property issue that has been identified in a survey.

Let’s take a look at some of the benefits of taking out indemnity insurance:

What is it?

Indemnity insurance gives you protection against cost associated with elements of a property that have been flagged as potentially problematic. It doesn’t give you protection against repairs or replacements, but can help you in specific circumstances. For example, if you’re buying a property that has double glazing but doesn’t have a FENSA certificate, the indemnity insurance would cover the loss if you had to remove them by instruction of a third-party, because of a lack of certificate, but not the price of replacing them.

The policy also doesn’t cover personal injury claims because of insufficient workmanship or losses because of local authority action.

You don’t have to take out indemnity insurance, but if a conveyancer presents issues with the potential property you want to buy, there are a few options to look at:

  • Take out indemnity insurance, so that if a problem arises with the issue identified, you will have an element of protection.
  • Ask the seller to sort out the issue in question, so you don’t have to take out indemnity insurance.
  • If the issue is very problematic or you don’t want to risk future issues, you can abandon the property purchase and look for another.

It can be very time-consuming and requires a lot of effort to ensure that a seller sorts out the issue in question before buying and there’s no guarantee that they’ll do this if you ask them to either.

Taking out indemnity insurance is usually the most sensible course of action. The issues covered by it are usually more minor, but they could end up being costly to replace or resolve. The insurance option can allow you to get moving with the property purchase again and gives you some reassurance and security.

The cost of indemnity insurance is usually a one-off payment that lasts decades and could be a few hundred pounds. There’s not a legal obligation that sets out who must take out the indemnity insurance, so it could be taken out by the buyer or the seller depending on your agreed arrangement. It can be in the seller-s best interest to cover the cost, so that their property is sold as swiftly as possible. The price to pay can be miniscule compared to if the whole property purchase falls through because of an issue.

For more information to do with buying or selling, get in touch with our experienced team at Home EA today.


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