Do I Need Indemnity Insurance When Selling a House?

Selling a house is hands-down one of the most stressful life events – especially when unexpected issues arise. While many homeowners are familiar with the usual tasks of listing, showing and negotiating, there are hidden considerations you might not be aware of—like indemnity insurance. If you’ve never heard of it or you’re not sure why you might need it, don’t worry—you’re not alone. In this blog, we’ll unpack indemnity insurance, explore whether you need it when selling your home and address some of the most common questions homeowners have.

What is indemnity insurance?

Indemnity insurance, also known as title indemnity insurance, is a form of protection used to cover certain legal risks that may affect the sale of your property. It’s designed to protect you (as the seller) and the buyer from financial loss in the event of legal complications that arise after the sale. 

These issues are usually related to title problems, such as a boundary dispute, building regulations or historical issues that weren’t disclosed or resolved properly.

In the simplest terms, indemnity insurance acts as a safeguard to prevent either party from losing money in the event of a legal issue tied to the property.

Do I need indemnity insurance when selling a house?

If you’ve been asking “Do I need indemnity insurance when selling a house?” you’re in good company. It’s a common query among homeowners.

But like so much else in life, the answer isn’t always straightforward – it depends on the specific circumstances of your property.

In some cases, indemnity insurance is recommended (and sometimes required) to ensure a smooth sale. For example, if there are any unresolved issues regarding planning permissions, building regulations or boundary disputes, indemnity insurance may be necessary to protect the buyer from future claims. It gives them peace of mind knowing that if any legal complications arise, they will be covered financially.

Next let’s look at five common situations where indemnity insurance might come in handy when selling a house.

Lack of planning permission

If you made improvements or extensions to the property without obtaining the necessary planning permissions or building regulation approvals, the buyer might be worried about the legality of these changes. In this case, indemnity insurance can protect both parties if the local authority ever decides to investigate the work after the sale.

Boundary disputes

If there are disputes over the boundaries of your property, especially if the title deeds aren’t clear or the physical boundaries are unclear, indemnity insurance can offer protection in case the buyer is involved in a future dispute with neighbors.

Restrictive covenants

Sometimes, properties are subject to restrictive covenants – legal clauses that limit what can be done with the property. If these are not properly disclosed or resolved, indemnity insurance can provide protection against any future claims made by those who might enforce the covenant.

Unresolved ownership issues

Sometimes an inheritance issue or previous dispute means that a property has an unclear ownership history. If so, indemnity insurance can ensure that the buyer is protected from any future challenges to the ownership of the property.

Chancel repair liability

If this one sounds like it comes from way back in time, that’s because it does – but it can still apply to some properties. Chancel is the name for part of a church, and this type of liability relates to a legal obligation to contribute to the cost of repairs to the local church. If it’s not clear whether you’re liable for this, indemnity insurance can step in.

So, as you can see, indemnity insurance is usually a one-off cost that can be relatively affordable, especially when compared to the cost of potential legal fees or the risk of a sale falling through.

How long does indemnity insurance last?

Once you’ve purchased indemnity insurance, you might wonder “how long does indemnity insurance last?” Typically, indemnity insurance lasts indefinitely, meaning that the coverage will remain in place even after the sale has been completed. The policy will protect both you as the seller and the buyer from any future claims arising from issues covered by the insurance.

However, indemnity insurance does not address every potential legal issue. It’s specifically designed for historical problems or issues that can’t be resolved immediately. It won’t cover things like current or ongoing legal disputes, or defects that arise after the sale has completed.

The buyer of the property will typically inherit the indemnity insurance policy, meaning they’ll be covered if a claim is made in the future, even after they’ve moved in. As long as the issue covered by the indemnity insurance doesn’t get resolved (like a boundary dispute or an unapproved extension), the policy will remain active.

How much is indemnity insurance when selling a house?

You might be wondering how much is indemnity insurance when selling a house? The cost of indemnity insurance can vary depending on the specifics of your property and the risks involved, but most sellers pay somewhere in the region of £50-300 per policy. When you compare this to the potential costs of resolving legal issues or the financial impact of a sale falling through, it seems very reasonable.

The price will depend on a few key factors, such as the property value, the type of coverage you need or how complex the issue is.

What are the benefits of indemnity insurance?

For many sellers, indemnity insurance offers numerous benefits, including:

1. A quicker sale: If there’s a title issue or a regulatory matter that could slow down the sale, indemnity insurance helps to remove any delays. The buyer can proceed with confidence knowing that the issue is covered.
2. Lower risk of sale falling through: Without indemnity insurance, a buyer might pull out if they have concerns over any legal risks tied to the property. With indemnity insurance, you can offer assurance that these risks are mitigated.
3. It’s often a one-off cost: Unlike ongoing insurance policies, indemnity insurance is generally a one-off payment, making it an affordable way to address issues without adding financial strain.
4. Buyer protection: Indemnity insurance protects the buyer in case any legal claims arise after they’ve moved in. This can make your property more attractive to potential buyers, particularly those who are risk-averse.

So, do I need indemnity insurance when selling a house?

Indemnity insurance often isn’t mandatory. However, it can be an incredibly useful tool to ensure that your property sale goes as smoothly as possible. In some cases, your solicitor or conveyancer may recommend purchasing indemnity insurance if any legal risks are identified during the sale process. It’s often an easy way to overcome any hurdles without lengthy disputes or negotiations.

Ultimately, the decision to purchase indemnity insurance depends on the specific circumstances surrounding your property. If you’re unsure, it’s worth discussing with your solicitor, who can help you determine whether it’s necessary and guide you on the cost.

The bottom line: It’s all about a smoother sale

Selling a house can feel like an overwhelming process, but indemnity insurance can provide an important layer of protection. Whether you’re dealing with boundary disputes, unapproved building work or unclear property ownership, indemnity insurance can give peace of mind to both you and your buyer, keeping a smooth sale on track.

So, while the cost of indemnity insurance might seem like an extra expense, it’s a small price to pay for the peace of mind it offers, especially when you consider the potential financial impact of hassle or delays in the sale.And speaking of ensuring a smooth, hassle-free sale, you might want to consider making selling your house a simple, straightforward process by working with Sell House Fast. We’re here to help sellers navigate any challenges along the way. Get a quote now and discover how a cash offer can help you take control of your situation.