When you look to sell your house, you likely aim for three things. A quick sale, an uncomplicated sale, and a sale that delivers the best possible value. Sometimes though, speedy completion just isn’t possible, and the best value may not even be seen for a few years. However, you can reduce the complications by delivering additional confidence to the prospective buyers. One such way to do this is through indemnity insurance. Whilst not always needed, getting indemnity insurance when selling your house can help make the home more attractive to a buyer, especially if there have been property issues that you may have caused.
In this blog, we look at indemnity insurance for sellers, what it covers, and whether it’s something you should be investing in.
What is indemnity insurance?
Indemnity insurance is a form of insurance that protects you from legal costs resulting from defects or issues with the property. These defects or issues may not be picked up until long after you sell the house or may, as is more common, appear during conveyancing. Indemnity insurance protects you from the legal costs associated with these defects.
For example, if you have lost the boiler installation documents or have no proof of planning for some alterations made to the home, you could see action taken against you. Likewise, the same action could be taken against the buyer in the future if a challenge was made over these developments that they were not involved in, or installations they did not oversee.
An indemnity insurance policy covers you and the buyer against the legal costs should that action eventually come to fruition.
For sellers, it can be vital. If property defects were discovered that could see local authorities one day pursue legal avenues, the buyer could find themselves facing huge legal bills, all due to your mistakes. Indemnity insurance will protect them against that and also, hopefully, see them put in a decent offer on the property when trying to buy it. Safe in the knowledge they cannot be held accountable for your errors, they know the legal costs won’t be forthcoming and do not have to lower their offer to cover expensive future costs.
It is a one-off policy that doesn’t move with the homeowner, it stays with the property for good and it doesn’t cover the cost of repairs. It simply covers the potential legal costs or damages associated with the defect.
What does indemnity insurance cover?
There are a range of issues that can be covered with an indemnity insurance policy, but they are always issues that either cannot be resolved easily or may prove to be costly and time-consuming to rectify. In many cases, the issues may not be considered as significantly risky, but they could be extremely expensive to fix. Indemnity insurance policies will cover things ranging from planning permission issues to incomplete documents and more. Below, we’ve listed some of the most common policies:
Planning permission indemnity insurance
One of the most common indemnity insurance policies, this particular type is useful if building work has been completed where there is no documentation to support whether the work was authorised. Such a policy would protect a buyer against costs should the local authorities or neighbours make a claim.
Building regulations indemnity insurance
Much the same as planning permission, this is a common form of indemnity insurance policy. This will cover costs brought on by altering, correcting or removing the unauthorised and unregulated work.
Boiler indemnity insurance
If you are selling your home but cannot prove the safe and legal installation of your boiler, you could look at an indemnity policy. However, an indemnity insurance certificate does not prove the boiler is safe and compliant, so it is often better to get a gas safety certificate instead.
Indemnity insurance for windows
Since 2002, it has been a legal requirement for all new window and door installations to come with a FENSA certificate. If you don’t happen to have these anymore, an indemnity insurance policy would be worthwhile. A local authority may look to act if they believe your windows do not follow regulations. Having this in place when you sell could help give the buyer added confidence that they won’t have to spend vast sums rectifying the problem.
Chancel repairs indemnity insurance
In some cases, property owners close to churches have a responsibility to help with its upkeep. This could be something that puts buyers off, having a chancel repairs indemnity insurance policy in place will cover those costs.
Absence of easement indemnity insurance
You are selling your house to someone who may wish to sell it in the future, and they will want to see as much value from it as possible. Just like you did when you sold it. An absence of easement indemnity insurance policy will protect the property from loss of value if a right of easement has not been granted. Sometimes, to access a property, you may have to cross over someone else’s land. A right of easement allows this.
Who is covered by indemnity insurance when you sell a house?
Indemnity insurance can cover both the buyer and seller from potential costs. However, once it is taken out, it stays with that property. If you take out the policy and then sell the house, the coverage will remain in place for the new owners to benefit from. This may seem like an additional cost not worth bearing but it could make the difference between whether you sell and whether you don’t!
Should the buyer or seller pay for indemnity insurance?
This can be tricky. The policy will benefit the new owners as they will be protected against future action taken against them. This often sees the suggestion that it is the buyer’s responsibility. However, if the issues have arisen due to negligence on the seller’s part, it would be advised the seller offers to secure a policy.
Occasionally, to make sure the sale goes through, the cost is split, however, this may require some negotiation, especially if the buyer raises concerns that you, as the seller, are the cause of the issues they may face in the future.
How much will indemnity insurance cost?
It varies by policy type. Chancel repair indemnity insurance policies are typically quite cheap, sometimes just a few pounds. Policies for missing safety documentation or other certificates could run to hundreds and in some cases, thousands of pounds. Typically, the average costs have a broad range meaning you could pay anything from £30-£300 for an indemnity insurance policy.
Much depends on the value of the house too and whilst you may be thinking you’ll shop around for the best deal; it doesn’t quite work like that. Indemnity insurance is provided by specialist companies and often, the solicitor dealing with the transaction will source you a quote and arrange the cover.
How easy is it to get indemnity insurance when selling my house?
It is fairly straightforward and can be completed in just one or two days so shouldn’t be too disruptive to your selling plans. The type of coverage you need can be a factor and should there be any complex information in the application, it may take a little longer. Speak to your solicitor and they will be able to set the wheels in motion for the policy to be organised.
How long do indemnity insurance policies last?
As indemnity insurance is linked to the home and not the individual, it will remain running, potentially forever. This may not always be the case though. When a home increases in value significantly, a new policy may need to be drawn up or the owner at the time of the increase may need to pay a one-off cost to raise the cover suitably.
Whilst policies should last indefinitely, you could find it ended early if you declare the property defects to a third party. Using the example of planning permission, if you have a policy to cover you for missing planning permission and then apply for that planning permission, you’ll invalidate the policy you have.
Is it important to get indemnity insurance when I sell my house?
It can be, especially if there are issues with the home that may see buyers look to offer less or refuse to offer at all. In some cases, a solicitor will insist a policy is taken to help make the sale happen. With the policy being transferred to the new owners, it can give them some peace of mind and added confidence in making an offer close to your asking price.
Knowing which policy is best can be tricky but speaking to a conveyancer will help illustrate the options open to you. Sometimes though, a cheaper alternative is available. Indemnity insurance is used for problems that are not easily fixed but that is not to say there is not a solution available that proves cheaper than the policy itself.
If you have a house for sale in Epsom or the surrounding areas, speak to Cairds, we are the award-winning local estate agent that can put your home in front of thousands of keen buyers. Should you be moving to the area, why not browse our selection of properties too. We have a vast range of properties for sale in Epsom, Ashtead and the neighbouring areas that appeal to families, couples and single occupants. Why not find out whether Epsom is a nice place to live and then have a look at what we can offer? Contact our team today to sell or buy in Epsom.