Indemnity insurance when selling a house is a specialist policy that protects buyers against legal costs and financial losses arising from property defects, missing documentation, or title issues that cannot be easily resolved during the conveyancing process.
The demand for indemnity policies has surged significantly in recent years, with solicitors increasingly recommending them as a quick solution to potential legal complications. Despite this increase in policy purchases, actual claims remain remarkably low, suggesting that most covered risks never materialise into real problems. Recent data shows that around 142,000 negligence claims are notified to insurers annually, but 98% of indemnity payments are settled for less than £580,000, with many policies costing just £20-£300.
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What Is Indemnity Insurance and Why Do You Need It?
Indemnity insurance is a one-off payment policy that provides financial protection against specific legal defects or missing paperwork that could cause problems for property buyers. Unlike other insurance types, this policy stays with the property for life, transferring automatically to future owners without additional premiums.
The policy serves as a practical alternative to investigating or rectifying property issues that would be costly, time-consuming, or impossible to resolve before completion. Solicitors and mortgage lenders often require this coverage when they identify potential risks during the conveyancing process.
What Does Indemnity Insurance Cover When Selling Your House?
The following table illustrates common indemnity insurance types and their typical applications:
| Insurance Type | Coverage | Risk Level | Typical Cost |
|---|---|---|---|
| Planning Permission | Unauthorised alterations or extensions | Low | £200-£500 |
| Building Regulations | Missing certificates for structural work | Low | £200-£500 |
| Restrictive Covenants | Breach of property use restrictions | Very Low | £50-£200 |
| Chancel Repair Liability | Church repair obligations | Extremely Low | £50-£200 |
| FENSA Certificates | Missing window installation documentation | Low | £20-£150 |
This table demonstrates how indemnity insurance addresses various property-related risks, with costs reflecting both property value and the specific issue being covered.
Most indemnity policies protect against legal expenses and compensation costs rather than actual repair work. For instance, if your property has an extension built without planning permission, the policy would cover legal costs if the council takes enforcement action, but wouldn’t pay for obtaining retrospective permission or demolishing the extension.
How Much Does Indemnity Insurance Cost for House Sale?
Indemnity insurance premiums range from £20 for minor issues like chancel repair liability to £500 or more for complex planning permission problems. The cost depends on your property’s value rather than the actual risk level, which explains why policies remain affordable despite covering potentially expensive legal issues.
Premium calculations use a sliding scale based on property value, meaning a £200,000 house will pay more than a £100,000 property for identical coverage. Specialist insurance providers offer these policies, so you cannot shop around on comparison websites for better deals.
Who Pays for Indemnity Insurance When Selling a House?
Most sellers pay for indemnity insurance, particularly when the issue stems from their actions or missing documentation from their ownership period. However, payment responsibility becomes negotiable depending on circumstances and how long the problem has existed.
Recent property transactions show various payment arrangements:
Seller pays fully when they caused the issue
Buyer pays when inheriting long-standing problems
Split costs when both parties benefit from completing the sale
Negotiated reductions in purchase price to offset insurance costs
Real-Life Scenario: Emma’s Property Sale in Maidstone
Emma from Maidstone discovered during her house sale that the conservatory added by previous owners lacked building regulations approval. Her buyer’s solicitor insisted on £400 indemnity insurance before proceeding with the mortgage application.
Initially, Emma refused to pay, arguing she hadn’t built the conservatory. However, when the buyer threatened to withdraw, potentially costing Emma thousands in estate agent fees and ongoing mortgage payments on her new property, she agreed to cover the insurance cost.
The sale completed successfully, and Emma avoided months of delays that could have cost far more than the insurance premium. If you’re facing similar complications during your property sale, remember that Property Saviour specialises in purchasing properties with complex issues, offering guaranteed completion without the stress of insurance requirements or lengthy legal processes.
Do I Need Indemnity Insurance If I’m Selling an Inherited Property?
When you sell inherited house assets, indemnity insurance becomes particularly relevant because you may lack complete knowledge about previous alterations or missing documentation. Executors often discover building work undertaken by deceased relatives without proper permissions, creating complications during estate sales.
Inherited properties frequently require indemnity coverage for missing FENSA certificates, planning permissions, or building regulations approval that occurred before your ownership. Estate beneficiaries should budget for potential insurance costs when planning property disposals, as these expenses can impact final inheritance distributions.
Reddit Insights: What Property Owners Really Experience?
Online discussions reveal fascinating insights about indemnity insurance in practice. One Reddit user described how their £301 fence-related policy became void after contacting the council for clarification, highlighting how communication with authorities can eliminate insurance options.
Another case involved sellers threatening to withdraw over an £80 rent charge certificate, demonstrating how small amounts can derail major transactions. At Property Saviour, we’ve seen how these seemingly minor issues create disproportionate stress for families already dealing with the emotional challenges of moving house.
Multiple Reddit users reported successful negotiations where sellers ultimately agreed to split costs after initial refusals, suggesting that persistence and clear communication often resolve payment disputes. The consensus among experienced buyers is that walking away remains a viable option when sellers become unreasonable about legitimate insurance requirements.
Can Indemnity Insurance Claims Actually Be Made?
While indemnity policies provide peace of mind, actual claims remain extremely rare due to the low-risk nature of covered issues. Most policies protect against events that have minimal likelihood of occurring, such as enforcement action for decades-old building work or restrictive covenant breaches.
However, policies do pay out when problems arise. Insurance covers legal defence costs, compensation payments, and sometimes the expense of corrective conveyancing to resolve title defects. The key limitation is that policies won’t fund actual remedial work or help obtain missing permissions.
What Happens If I Refuse to Buy Indemnity Insurance?
Refusing indemnity insurance when solicitors or lenders require it will likely cause your sale to collapse. Mortgage providers increasingly demand these policies to protect their lending interests, making buyer compliance essential for transaction completion.
Some sellers attempt to find buyers who don’t require mortgages to avoid insurance costs, but this significantly reduces the potential buyer pool. Cash purchasers may still insist on indemnity coverage to protect their investment, particularly for substantial property defects.
How Long Does Indemnity Insurance Last?
Indemnity insurance provides lifetime coverage that automatically transfers to subsequent property owners without additional premiums. This permanent protection means you only pay once, regardless of how many times the property changes hands in future.
The policy remains valid even if property values increase significantly, though some insurers may require coverage adjustments for substantial value changes. This lifetime protection makes indemnity insurance cost-effective compared to ongoing policy renewals.
Why Are Indemnity Insurance Claims So Rare?
Claims remain uncommon because most covered risks involve historical issues where enforcement becomes increasingly unlikely over time. Local authorities rarely pursue planning enforcement for decades-old building work, and restrictive covenant beneficiaries often cannot be traced or lack interest in pursuing breaches.
The low claim frequency explains why insurers can offer affordable premiums despite covering potentially expensive legal problems. This statistical reality provides confidence that purchasing indemnity insurance offers genuine protection rather than unnecessary expense.
Should I Get a Survey Even With Indemnity Insurance?
Indemnity insurance covers legal costs but never pays for actual repairs or remedial work. Therefore, property surveys remain essential to identify structural problems, safety issues, or installation defects that insurance won’t address.
Consider indemnity insurance as legal protection rather than a substitute for proper due diligence during property purchases. Buyers should always commission appropriate surveys to understand physical property conditions before committing to purchase.
When property transactions become complicated due to missing documentation or legal uncertainties, remember that we buy any property regardless of these issues. At Property Saviour, our experienced team understands the stress these complications create during already emotional property sales. We offer straightforward cash purchases that eliminate the need for indemnity insurance, providing certainty when traditional sales processes become overwhelming.
Our guaranteed purchase service means you can move forward without the uncertainty of insurance requirements, buyer negotiations, or lengthy legal processes. If ongoing complications are preventing your property sale from progressing smoothly, reaching out to discuss your options might provide the relief and certainty you need to move forward with confidence.
Property Saviour: Your Solution for Unresolvable Property Issues
At Property Saviour, we specialise in buying properties with challenging issues, including those that can’t secure indemnity insurance. We offer a straightforward, hassle-free process to purchase your property quickly, regardless of its condition or legal complications.
Unlike estate agents, we don’t need to find external buyers or rely on mortgage lenders. We buy directly with our own funds, allowing us to complete purchases swiftly, often within 10 days or at a timescale that suits you.
Don’t let the lack of indemnity insurance hold you back from moving on. Contact Property Saviour today for a no-obligation cash offer on your property. Request a callback now, and let us show you how we can solve your property selling challenges.
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