Indemnity insurance in the context of property purchase is a one-off premium insurance policy that protects the buyer, and typically their mortgage lender, against the financial consequences of a specific legal defect, title issue, or absence of documentation that has been identified during the conveyancing process. It is one of the most practical tools available to property solicitors for resolving title issues that would otherwise delay or prevent a transaction.

What Indemnity Insurance Covers

An indemnity policy does not fix the underlying legal issue; it insures against the financial loss that would result if the issue were enforced against the policyholder. Common situations where indemnity insurance is used include building regulations completion certificates missing for alterations carried out without formal sign-off, planning permissions absent or unclear for extensions or outbuildings, restrictive covenants that have been breached, absence of a formal right of way or access that has been used informally, flying freeholds or possessory title issues, and missing title deeds or other documentation gaps.

How It Works

The solicitor identifies the specific risk or deficiency in the title or documentation and obtains a quote from one of the specialist legal indemnity insurance providers. The policy is typically a one-off premium of between fifty and five hundred pounds depending on the risk type and the property value. The policy runs for the lifetime of the policyholder's ownership and is assigned to future owners when the property is sold, providing continuing protection. Both the buyer and any mortgage lender are typically named as joint insureds on the policy.

When to Use It

Indemnity insurance is appropriate where the risk of the underlying issue being enforced is genuinely low and the cost of resolving the issue through other means, such as retrospective planning permission, regularisation under Building Regulations, or formal deed execution, exceeds the cost of the policy. For issues where there is an identifiable and active party who might enforce the breach, indemnity insurance provides less reliable protection and formal resolution may be preferable.

Summary

Indemnity insurance covers the financial consequences of specific legal or title defects identified during conveyancing. It is a one-off premium policy that protects the buyer and lender for the lifetime of their ownership. It does not fix the underlying issue but insures against the risk of it being enforced. It is appropriate where enforcement risk is genuinely low and formal resolution is disproportionately expensive. Never contact potential enforcers before obtaining the policy.