Do I Need Indemnity Insurance When Selling a House

When selling a house in the UK, questions about indemnity insurance often arise. Indemnity insurance is a type of policy that protects the buyer and sometimes the seller from financial losses linked to certain legal or property issues. It is not always required, but it can be an effective way to resolve potential problems that could otherwise delay or derail a sale. Understanding when indemnity insurance is necessary, what it covers, and how it works will help you decide if it is something you need when selling your home.

What Indemnity Insurance Covers

Indemnity insurance policies are designed to provide financial protection against specific risks that might affect a property. Common examples include missing planning permission or building regulation certificates for work carried out, breaches of restrictive covenants, unknown rights of way, or missing deeds in unregistered properties. The insurance does not fix the underlying problem but provides a safety net by covering the costs of legal action or financial loss if the issue arises in the future. Buyers and their solicitors often request such cover as reassurance when potential risks are discovered during the conveyancing process.

Is Indemnity Insurance a Legal Requirement

You are not legally required to take out indemnity insurance when selling a house. However, in many cases, it can make the difference between a smooth sale and a stalled one. If the buyer’s solicitor identifies a missing document, such as a building regulations completion certificate for an extension, they may advise their client not to proceed unless indemnity cover is in place. Agreeing to provide the policy as the seller can therefore help keep the transaction on track. While it is not compulsory, it is often the most practical solution to satisfy all parties.

Who Arranges and Pays for the Policy

In most cases, it is the seller who arranges and pays for the indemnity insurance. This is because the issue usually relates to something on the seller’s side, such as paperwork for work carried out during their ownership. The cost of indemnity insurance varies depending on the risk covered but is generally a one-off premium that is relatively modest compared with the value of the property, often ranging from £50 to a few hundred pounds. The policy lasts indefinitely and passes to future owners, which makes it an attractive reassurance for buyers.

When You Might Need Indemnity Insurance

There are several scenarios where indemnity insurance is commonly used in UK property sales. If you built a conservatory, loft conversion, or extension without getting the necessary planning or building regulation approval, a buyer may insist on cover before completing. Similarly, if an old covenant restricts certain uses of the property and you cannot confirm it has been discharged, insurance may be needed. Missing rights of way documentation or uncertainty over boundaries can also trigger the need for a policy. The buyer’s solicitor usually identifies these risks during their checks and raises them with your solicitor.

Alternatives to Indemnity Insurance

In some situations, it may be possible to resolve the issue directly rather than relying on insurance. For example, retrospective building regulation approval can sometimes be sought from the local authority. However, this can take time, may not always be granted, and could alert the authority to breaches that were previously unnoticed. Indemnity insurance is often the quicker and more straightforward route, especially when both buyer and seller are keen to avoid delays. This is why it has become such a common feature of property transactions.

Summary

You do not always need indemnity insurance when selling a house, but it is often the simplest way to deal with legal or paperwork issues uncovered during conveyancing. It reassures buyers, helps solicitors progress the sale, and avoids costly delays. Policies are relatively inexpensive, last indefinitely, and cover future owners too. While not a legal requirement, indemnity insurance has become a standard solution in many UK property transactions, and being prepared to arrange one can make your sale smoother and more secure.