You’ve accepted an offer on your home and everything seems to be moving along smoothly, until an email from your solicitor lands in your inbox. It mentions a “defect in the title” and the need for something called “indemnity insurance”. For many sellers, these words trigger confusion and worry about costs and delays.
If you’re scratching your head wondering what on earth indemnity insurance is and how much it’s going to set you back, you’re not alone.
Indemnity insurance is a common, but often misunderstood, part of the UK conveyancing process. This article will provide a clear, no-nonsense guide to indemnity insurance, covering what it is, the common reasons you might need it, how much it costs, and who typically pays.
We’ll also reveal why this seemingly small detail can derail your entire sale — and show you a simpler alternative.
What Exactly is Property Indemnity Insurance?
Let’s cut through the jargon.
Property indemnity insurance is a one-off insurance policy taken out during the sale of a property. It protects the new owner and their mortgage lender from potential financial loss arising from a specific legal defect with the property.
Here’s the crucial bit: it doesn’t fix the underlying problem.
It’s simply a financial safety net. If a third party were to make a claim against the new owner because of the defect, the insurance policy would cover the legal costs and any potential drop in the property’s value.
Think of it as a plaster for a legal problem, not the surgery to correct it. It covers the issue so the sale can proceed, but the wound underneath remains.
For instance, if you built a conservatory without planning permission 10 years ago, the indemnity insurance won’t magically grant you retrospective permission. Instead, it protects the buyer if the council decides to take enforcement action in the future.
Common Scenarios That Require Indemnity Insurance
You might be wondering what sorts of issues trigger the need for this insurance.
Here are the most common culprits:
1. Lack of Planning Permission or Building Regulations Consent
This is incredibly common. Perhaps a previous owner built a conservatory, removed a supporting wall, or installed new windows without the required council sign-off. Maybe you converted your loft into a bedroom but never got the paperwork sorted. The policy covers the risk of the council taking enforcement action, a process you can learn more about on the official government website.
2. Restrictive Covenants
Your property’s deeds contain rules that have been broken. For instance, the deeds might forbid building an extension, but one was added years ago. Or perhaps there’s a covenant stating “no commercial vehicles on the drive” but you’ve been parking your work van there for years. The policy protects against a third party (who benefits from the covenant) taking legal action.
3. Absence of Easement
Your property lacks the formal legal right of way for access or services. Maybe you use a private drive to reach your home, or you have pipes that run under a neighbour’s land, but there’s no official documentation granting you these rights.
4. Chancel Repair Liability
This is a historic and rather obscure risk. If your property is located within a parish, you could still be liable for the cost of repairs to the local medieval church. Yes, really. It’s rare, but it is a real consideration for conveyancers.
5. Missing Documents
Key documents have gone walkabout. Perhaps the original title deeds are missing, or you can’t find the safety certificates for your boiler or new wiring. Without these papers, buyers and their lenders get nervous.
Each of these scenarios creates uncertainty for the buyer. And where there’s uncertainty, mortgage lenders demand protection.
6. Environmental Risks
While selling a property, buyers will do searches to understand the risks. These can come back highlighting things like contaminated land or risk of flooding. When that happens, it will likely spook the buyer, and with good reason too. Instead of wasting time investigating whether the risk is critical or even valid (because often they aren’t), buyers or sellers can just take out indemnity insurance quickly, allowing them to proceed with the sale.
The Key Question: How Much Does It Cost?
Let’s address the elephant in the room.
There’s no fixed price for indemnity insurance. The cost is calculated based on two main factors: the value of your property and the level of risk the policy needs to cover.
Here’s what you can expect:
Policies are a one-off payment made during the conveyancing process. No monthly premiums or annual renewals to worry about.
They can cost as little as £20 for a very low-risk issue on a lower-value property.
More commonly, policies range from £50 to £350.
For more serious risks, such as a significant breach of a restrictive covenant on a high-value property, the cost can exceed £500.
Let’s look at some real-world examples:
- Example 1: A policy for a missing boiler installation certificate on a £275,000 house might cost around £40.
- Example 2: A policy for lack of building regulations on a loft conversion for the same house could set you back £250.
- Example 3: A policy to cover a breached restrictive covenant (say, that extension that shouldn’t be there) could be £400 or more.
The insurance company assesses each case individually. A missing certificate for double glazing installed last year is low risk. A two-storey extension built without any permissions whatsoever? That’s going to cost more to insure.
Who Pays for the Indemnity Policy?
Here’s where things get interesting.
There’s no law stating who must pay. It’s a point of negotiation between buyer and seller.
However, in practice, the seller usually pays for the policy.
Why? It’s in the seller’s interest to keep the sale moving forward. The buyer’s solicitor and their mortgage lender are the ones demanding the protection. If you want the sale to complete, you provide the insurance to satisfy their requirements.
From the buyer’s perspective, they’re inheriting your property’s legal issues. It’s reasonable for them to expect the person benefiting from the sale to cover the cost of insuring against those issues.
That said, in a competitive market where buyers are desperate, you might successfully negotiate for them to pay. But don’t bank on it.
The Hidden Cost of Indemnity Insurance: Delays & Collapsed Sales
While the monetary cost of a policy might be manageable, the real “price” of indemnity insurance is often paid in time, stress, and uncertainty.
Here’s what actually happens:
The process isn’t instant. First, the buyer’s solicitor identifies the risk during their searches. They communicate this to seller’s solicitor. The seller’s solicitor then needs to get quotes for a suitable policy. Once a policy is selected, it must be sent to the buyer’s mortgage lender for approval.
This last step alone can add weeks to your timeline.
Some lenders are notoriously picky about which policies they’ll accept. They might reject the first policy and demand a different one. Or they might decide the risk is too great and refuse to lend altogether.
Meanwhile, the buyer is getting nervous. They’re seeing delays, additional costs, and legal complications. If they’re already stretched financially or emotionally, this could be the final straw.
We’ve seen countless sales collapse at this stage. The buyer gets cold feet and pulls out, leaving the seller back at square one. You’ve wasted weeks or months, and now you need to find another buyer who might uncover the same issues all over again.
For sellers who need to move quickly, perhaps due to debt, selling after divorce, or a job relocation, these delays can be devastating.
The Simple, Fast Alternative to Legal Complexities
What if you could bypass these legal hurdles and uncertainties altogether?
This is where a guaranteed cash house buyer like Property Rescue offers a clear path forward.
As a professional cash buyer, we’re not reliant on mortgage lenders because we don’t need to borrow to buy. Our experienced team can assess properties with legal defects and make a fast, firm cash offer. The issues that cause delays in a traditional sale often don’t stop us.
Here’s why we’re different:
We don’t need mortgage approval. Those weeks spent waiting for a lender to approve an indemnity policy? They simply don’t exist in our process.
We provide a guaranteed offer. Once you accept, the sale is secure. You don’t have to worry about a buyer pulling out at the last minute because of a solicitor’s report or a nervous lender.
We cover your costs. With Property Rescue, we pay your legal fees. This means no unexpected bills for indemnity policies or other conveyancing costs. That £300 insurance policy your buyer’s solicitor is demanding? It’s not your problem. It’s ours.
Instead of spending weeks negotiating over insurance policies and watching your sale hang in the balance, you could have the entire transaction completed and the cash in your bank.
We can exchange contracts in as little as 48 hours and work to a completion date that suits you.
Consider this scenario:
Sarah inherited her late mother’s house in Birmingham. During the sale process, the buyer’s solicitor discovered that the conservatory had been built without planning permission fifteen years ago. The buyer’s lender demanded indemnity insurance, but then rejected the first policy.
Weeks passed. The buyer, already stressed about their own house sale, pulled out.
Sarah was devastated. She needed the money to settle the estate, a common challenge when selling an inherited property, and was already dealing with the emotional toll of losing her mother.
When she contacted us, we made her a fair cash offer within 24 hours. The conservatory issue? Not a problem for us. We completed the purchase in three weeks, and Sarah could finally move forward.
This isn’t an isolated case. All our property purchases are completed within under 28 days unless the seller specifically wants it to take longer.
Making the Right Decision for Your Situation
Indemnity insurance is a one-off policy designed to cover legal risks when selling property.
Costs vary dramatically, from as little as £20 to over £500, depending on your property’s value and the specific issue being covered.
While it’s a useful tool in the conveyancing process, it comes with hidden costs: delays, uncertainty, and the risk of your sale collapsing entirely.
The most effective way to guarantee a fast sale is to sell to a professional house buying company that guarantees to buy any property (like Property Rescue).
Get a free, no-obligation cash offer from Property Rescue today.
No chain. No delays. No surprise insurance policies.
Just a straightforward sale at a fair price.
Because selling your house shouldn’t feel like navigating a legal minefield.
