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How Long Does Indemnity Insurance Last: The UK Resident Guide

Written by, Marija Petkova

Updated April, 21, 2022

If you are a UK resident looking to purchase a new home, you may be wondering how long does indemnity insurance last, what it actually is, and how much it costs.

The sections below answer all of these questions and explain why it’s essential to get a house indemnity insurance to protect your property investment.

Let’s get to business!

What Is Indemnity Insurance?

An indemnity insurance policy is a type of coverage that homebuyers and homesellers can use as protection against any legal action taken against the property after and during a sale.

For example, if the conveyancing and survey processes discover that the vendor did not have planning permission for a property extension, the buyer or the seller would be protected against any financial losses incurred as a result.

You may be interested in: How to Flip Houses in the UK?

How Long Does Indemnity Insurance Last?

In most cases, a home indemnity insurance coverage can last for decades or even indefinitely as it’s attached to the property and not the owner. However, if the property’s value increases over time, the owner may be required to pay premiums to maintain coverage.

Note: You will effectively invalidate your indemnity insurance if you reveal any defects covered by the policy to any third-party companies or individuals.

What Does Indemnity Insurance Cover?

After learning all about the indemnity policy meaning, we should also review the most common risks such insurance coverages protect against:

  • Building regulations—indemnity insurance for building regulations that covers the costs of work needed to remove property changes with missing particulars;
  • Planning permissions—this coverage provision protects you if there’s a lack of planning permission for work that has been done on the property;
  • Liability for chancel repair—this specific policy covers the repair costs of any parochial church in your neighbourhood;
  • Restrictive covenant—indemnity insurance for extension breaches that covers the legal expenses when defending against violations of a restrictive covenant in the title;
  • Absence of build over agreement—this insurance provision applies to properties that have been extended over or within three meters of a sewer without the right paperwork;
  • Absence of access rights—if you would like to gain access to your property from your neighbour’s side, this proviso will cover the legal costs of any dispute that may arise;
  • Adverse possession—this policy protects property buyers without proof of legal ownership if third parties attempt to claim the land on which the house is built;
  • Missing particulars—if the owner is unable to submit the necessary legal property documents, this insurance stipulation covers the costs to obtain new ones.

Note: If the seller refuses to cover the building indemnity insurance, the buyer should get one to avoid unexpected costs in the future or satisfy the requirements of a mortgage. Remember that indemnity insurance is very different from building insurance.

Do You Need Indemnity Insurance for a House?

While these types of policies may cover minor and inexpensive risks, you should still obtain indemnity insurance when buying a house or selling any property to avoid potential legal costs and the time and hassle it takes to resolve them.

However, you should purchase such coverage even in the following cases:

  • Selling the property faster—instead of fixing any potential issues, you can avoid any sales delays by getting cover for the problems;
  • Conveyancers advise getting one—conveyancers who discover an issue with the property will always advise potential buyers to get this insurance;
  • Your mortgage supplier and solicitors insist on one—the majority of lenders won’t permit a sale going through without the proper indemnity insurance in place.

Taking out indemnity insurance when selling a house should be your last resort, as you may be able to fix certain minor issues quickly. You can also avoid a value loss in the future by having your property underpinned as a protection against soil changes and house extensions.

Can You Pass on an Existing Indemnity Insurance?

Since the indemnity insurance covers the property instead of the owner, it is perfectly transferable in a house sale. Therefore, when selling a house, hand over the coverage documentation to the buyer who will be utilising its protection thereafter.

However, while you can transfer the policy free of charge, the new owner may have to pay additional insurance fees if and when and property value significantly increases.

Note: Sellers can be found liable for the property several years after the sale, provided the buyer discovers a severe issue that results in the house value plummeting.

How Much Does Indemnity Insurance Cost?

You shouldn’t worry about covering the indemnity policy cost in the UK, as it’s a one-off payment that generally ranges between £20 to £500, without monthly or annual premiums.

The final price of an indemnity insurance for a house sale will vary based on factors such as:

  • The types and number of provisos it includes (as described above),
  • The circumstances surrounding the property issues,
  • The current value of the property as insurance costs rise with it,
  • Whether or not the policy includes any special provisions,
  • Whether or not someone makes a policy arrangement for you,
  • The actual insurance provider you choose.

Note: Consult with your conveyancer or an insurance specialist to get a good policy quote that matches the value and issues of your property.

Who Pays for an Indemnity Policy?

While neither the seller nor the buyer is legally obliged to get an indemnity policy for a house sale, the party selling the property is expected to do so to expedite the sale.

Ultimately, sellers choose to cover this minor one-time payment over failing to sell the property, as buyers are well within their rights to cancel the transaction at any time.

However, even if the seller avoids paying the coverage bill, new owners should get one as they will have to pay out of pocket for any issues that may arise down the line.

Bottom Line

So, there you have it—everything you need to know about property indemnity insurance in the UK. We hope this article was helpful in making your house purchase a worthy investment. If not, check out our other articles on a variety of topics related to personal finance and insurance.

Frequently Asked Questions And Their Answers

What is indemnity insurance when selling a house?

Indemnity insurance is a type of policy that protects the buyer from any financial losses that may arise from issues with the property after purchase, such as various legal defects.

How often do you pay indemnity insurance?

If you’ve learned how long does indemnity insurance last and you think it affects the price of the policy, that’s not the case. In fact, you can buy indemnity insurance in the UK with a one-off payment, so there aren’t any annual premiums that you would need to pay.

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.