When buying a property, your conveyancing solicitor may recommend indemnity insurance to protect against legal defects that can't be easily resolved. This guide explains what it covers, when you need it and how much it costs.
What is indemnity insurance?
Indemnity insurance protects you against the financial cost of legal defects found with a property that can't be resolved effectively or would incur significant cost and time to fix.
It's important to understand what indemnity insurance does and doesn't cover:
What it covers:
- Legal costs if someone takes action against you
- Loss of property value resulting from the defect
- Protection for you, future owners and your mortgage lender
What it doesn't cover:
- The actual cost of fixing or replacing the defect
- Remedial work to bring something up to standard
- Physical repairs or replacements
For example, if windows don't conform to building regulations, the insurance covers legal costs and loss of value - but not the cost of installing compliant windows.
Indemnity insurance typically comes into play when conveyancing searches or surveys reveal issues that the seller cannot resolve through documentation or retrospective permissions.
How much does indemnity insurance cost?
The cost of indemnity insurance depends on the type of defect being covered and the extent of the issue. Your conveyancing solicitor will arrange the policy and add it as a third-party cost to your conveyancing bill.
Typical costs:
| Policy type | Typical cost |
|---|---|
| Chancel repair liability | £20-£30 |
| Missing FENSA certificates | £30-£60 |
| Missing gas safety certificate | £30-£60 |
| Restrictive covenant breach | £50-£150 |
| Lack of planning permission | £80-£200 |
| Building regulations non-compliance | £80-£200 |
| Absent freeholder | £100-£300 |
| Easement issues | £100-£250 |
These are one-off payments that provide lifetime cover for you and future owners. The policy stays with the property when you sell.
Is indemnity insurance worth the cost?
For first time buyers, spending £50-£200 on indemnity insurance can feel like yet another unexpected cost. However, it's typically worth it because:
- The alternative (obtaining retrospective permissions) often costs thousands and delays your purchase by months
- It protects your property value and saleability in the future
- Your mortgage lender may require it before releasing funds
- It covers you and all future owners, not just current issues
Your solicitor will only recommend indemnity insurance when it's the most practical solution to a genuine legal risk.
Indemnity insurance when selling a house
It's not only buyers who take out indemnity insurance. Sellers are often the ones who pay the premium, particularly when a legal defect comes to light during the buyer's conveyancing searches and the seller cannot resolve it through documentation.
Paying for a policy is frequently the quickest way to keep a transaction on track. Rather than waiting months for retrospective permissions or risking the buyer pulling out, a one-off premium resolves the issue and allows both sides to proceed to exchange. The policy then transfers to the buyer and stays with the property.
If you're selling and your solicitor recommends indemnity insurance, it's usually a practical step rather than a sign of a serious problem with your home.
Types of indemnity insurance policies
Different policies cover specific legal defects that might affect your property. Your conveyancer will recommend the appropriate policy based on issues found during the conveyancing process.
Planning permission indemnity insurance
Covers the risk that a local council may enforce action if alterations were made without planning permission or if the seller cannot provide documentation proving the changes were within permitted development rights at the time.
This is particularly common with extensions, loft conversions or property use changes where documentation has been lost over time.
Building regulations indemnity insurance
Protects you if alterations don't conform to building regulations and the seller cannot provide the required completion certificates. This often applies to work completed before 2002 when record-keeping was less rigorous.
Important: Get a detailed building survey to verify structural safety, even if you have indemnity insurance. The insurance only covers legal costs, not physical repairs.
Restrictive covenant indemnity insurance
Covers potential breaches of covenants detailed in the property deeds. These might restrict property use, require maintenance of public areas or limit what can be built or grown on the land.
The insurance protects you from enforcement action and covers breaches by previous owners as well as any future breaches during your ownership.
Missing FENSA certificates
Windows and doors fitted after 2002 require FENSA (Fenestration Self-Assessment Scheme) certificates proving compliance with building regulations. If these are missing, indemnity insurance covers potential council enforcement action.
Absent freeholder indemnity insurance
If you're buying a leasehold property and the freeholder is uncontactable, this policy covers the risk of them returning and making claims. It's particularly relevant if you're planning to buy the freehold or extend the lease.
Your mortgage lender may require this policy before approving your loan.
Chancel repair liability
Historically, some properties carry an obligation to contribute to local church repairs. Although rare, if your property is in a parish with chancel repair liability, taking out this relatively cheap policy (£20-£30) provides peace of mind.
Easement issues
Covers situations where access rights across someone else's land (for example, to reach your property or put out bins) have not been formally granted or have been changed without proper documentation.
Other common policies
Gas safety certificate: If the seller cannot provide certification for boiler installation by a registered gas fitter.
Adverse possession: Covers claims on land where the seller has possessory title but cannot prove ownership to the Land Registry.
Insolvency protection: If you've received a gifted deposit and the donor is later declared bankrupt, this protects against creditor claims on your property.
How will I know if I need indemnity insurance?
You rarely need to request indemnity insurance yourself - your conveyancing solicitor will recommend it based on issues found during:
Conveyancing searches Legal checks reveal missing documentation, planning issues or restrictions that can't be easily resolved.
Property surveys The surveyor identifies alterations, installations or access issues that require legal verification.
Title investigation Problems with property deeds, ownership history or registered restrictions come to light.
Should I take out the policy?
When deciding whether indemnity insurance is right for you:
- Ask about the risk level - How likely is enforcement action?
- Compare costs - Insurance premium vs cost of resolving the issue properly
- Consider alternatives - Can retrospective permission be obtained?
- Think about resale - Will this issue affect selling the property later?
Your solicitor has experience with these matters and can advise on the best course of action. If you're unsure about what the policy covers or why you need it, ask for clarification before proceeding.
Important points about indemnity insurance
One-off payment: You pay once and the policy lasts indefinitely.
Transferable: The insurance stays with the property and covers all future owners.
Lender protection: Your mortgage provider is covered by the policy.
Essential documentation: Keep the policy safe and pass it on when selling.
Inform your lender: Let your mortgage provider know about any indemnity policies taken out.
Indemnity insurance for first time buyers
If you're buying your first home, indemnity insurance might feel like another unexpected expense on top of conveyancing fees, stamp duty and surveys.
However, it's usually the most cost-effective solution when issues arise:
Why it matters for first time buyers:
- Protects your investment in your first property
- Avoids delays of 3-6 months waiting for retrospective permissions
- Prevents the purchase falling through over resolvable issues
- Gives you confidence that known legal risks are covered
Common scenarios for first time buyers:
- Buying older properties with historic alterations and missing documentation
- Purchasing flats with absent freeholders
- Properties where sellers have mislaid certificates over the years
Remember, your solicitor won't recommend insurance unnecessarily. If they suggest a policy, there's a genuine legal risk that needs addressing before you can proceed safely with your purchase.
Looking for conveyancing services?
If you are buying or selling a property and are unsure whether you are covered for any legal costs of potential problems and whether indemnity insurance is right for you, you should talk to your conveyancing solicitor.
The experts at Homeward Legal are well-versed in all aspects of the conveyancing process, including indemnity and the policies that are available, providing a quality conveyancing service at a fee that is great value for money!
Call to get your conveyancing quote started, or to discuss your concerns with your plans to purchase or sell your next home.
Frequently asked questions about indemnity insurance
What is property indemnity insurance?
Property indemnity insurance protects you against legal costs and loss of value from property defects that can't be easily resolved. It covers issues like missing planning permission, building regulation breaches, restrictive covenants and absent freeholders. The insurance is a one-off payment that covers you, future owners and your mortgage lender for the lifetime of the property.
How much does indemnity insurance cost?
Indemnity insurance typically costs between £20 and £300 depending on the type of defect being covered. Simple policies like chancel repair cost around £20-£30, while more complex issues like absent freeholders or planning permission problems cost £100-£300. Your conveyancing solicitor arranges the policy and adds it to your conveyancing costs.
Does indemnity insurance cover the cost of repairs?
No. Indemnity insurance only covers legal costs and loss of property value resulting from the defect. It does not pay for physical repairs, replacements or remedial work. For example, if you need indemnity insurance for windows that don't meet building regulations, the policy covers legal costs if the council takes action, but not the cost of new windows.
When do I need indemnity insurance?
Your conveyancing solicitor will recommend indemnity insurance when searches or surveys reveal legal defects that cannot be resolved through documentation or retrospective permissions, or when doing so would be too costly or time-consuming. Common triggers include missing planning permission, absent freeholders, restrictive covenant breaches and missing building regulation certificates.
Does indemnity insurance transfer to new owners?
Yes. Indemnity insurance stays with the property when you sell and covers all future owners. This makes it an important document to keep safe and pass on during your sale. The policy continues to protect against the covered legal risk for as long as the property exists.