In the
process of buying or selling a house, your conveyancer may make reference to an
“indemnity policy” or to “indemnity insurance” which may have no meaning to you
if not supported by an explanation.
Indemnity Insurance products are a common purchase during property transactions and can cover a number of risks. As such, they are there to provide protection.
They can be used to protect against the cost of third party claims made against you should a legal issue arise when undertaking a sale or purchase transaction.
A policy is raised against a specific potential problem that could possibly result in substantial costs or losses borne at a later date.
Legal issues regularly covered by an indemnity policy would be problems with the title deeds (ie, lack of an easement or a reservation of a right over the land being sold or purchased), planning problems (such as lack of consent to alterations or additions made) or in relation to missing documents, all of which could lead to financial consequences at a future time. They would usually cover legal defects which would otherwise be costly or time consuming to resolve but for the most part, have a potential low risk and in effect, would actually be unlikely to ever cause a problem.
An indemnity insurance would only protect against costs and damages associated with legal claims against you, it would not cover any repair cost or the cost of any fines or penalties that may be imposed.
Usually a policy would last “in perpetuity” (ie, forever), and remain with a property, benefitting any future owner. They are subject to a one-off premium, usually paid by the party with the “defective” property and the insured amount would be the value of that property. The indemnity insurance value would usually increase at a rate of ten per cent per year to a maximum level of 200% of the initial insured sum but bespoke policies can potentially be provided, depending on the specific circumstances of a case.
If you require any assistance in relation to a conveyancing issue, please contact the Property Team at Rowberrys Solicitors on property@rowberrys.co.uk or 01344775311.