Indemnity Insurance – Is it just cynical me?

Suzy_M

With apologies to all hard-working, thorough and conscientious professionals BUT -

Is it just me or does anyone else suspect that indemnity insurance in the house buying-selling process is just a similar version of maintenance / product replacement policies? (i.e. over-priced / uneconomical, will never really be needed or will only be honoured when hell freezes over and therefore purely of perceived piece of mind value.)

Looking at the posts on this board these policies seem to be recommended for this, that, the other and everything else. It appears that many of these issues could be cleared up just by the professionals doing their job properly in the first place.

I have no personal experience of these (so am fully prepared to be howled down) and have no house selling-buying plans in the foreseeable future - I'm just curious and very puzzled. So has anyone ever claimed against these policies – and most importantly were they successful?

Where do you get indemnity insurance - the professional who advises you the policy is essential? If so would I be right in suspecting that some of these professionals are therefore being paid not once, but twice, for not actually doing their job – first by the house buyer/seller and then by the insurance company.

cats!

Hi SuzyM!

Love the comment about "hell freezing over"!

I think a lot of it now boils down to the "sue every bu**er" culture which we now find ourselves in. In the past solicitors and even to some extent mortgage lenders would not sweat the small stuff and let things slide.

Not so nowadays. Every bottom-covering trick has to be covered!

Normally the insurance can be arranged through the solicitor but often it can be cheaper to source the product online independently. Speaking as someone going through a sale and purchase at the moment, indemnity policies are most definetly (excuse poor spelling) the new "extended warranty".

The only good thing really is they can be passed on if you are mad enough to want to sell a home again! One word of warning - you cannot obtain one if you have tried to resolve the issue and know it's a problem! That is why solicitors often recommend going straight for the indemnity policy!

daelaan

there does seem to be a huge difference in price for these things, especially after seeing so many people say theirs cost upwards of 150 to 200 pounds.

i just got mine, it cost 27 quid

diddlydum

Indemnity insurance is the quick and cheap alternative to sorting out the problem, and most buyers are only interested in the quick and cheap alternative. Most solicitors who request indemnity insurance would get the problems resolved if needed, but most buyers don't want to wait the six months it can take an easement or building regulations dispute to be resolved

Most indemnity insurance will not ever be needed, so in that respect its a con, but most home contents or buildings insurance will never be needed and people still happily pay for that.

I'd get indemnity insurance for defects because, as much as anything, it makes the selling process easier and quiicker five years down the line, as indemnity insurance is usually just a one-off premium.

Chichi_2

Daelan,

Could you pls let us know where you got the indemnity insurance for £27 or pm me. Thanks.

Doozergirl

The price of a policy does appear to depend on what it is covering and the value of the property it is covering. You won't find a catch-all policy for £27, nor will you find it easy to find a company that will sell directly to a vendor/purchaser.

Chichi_2

I would still like to know where to start looking on the web. I can't seem to find anything that is not for contractors or freelancers.

Richard_Webster

There are lots of different sorts of indemnity policies - so the prices vary according to the type of policy and the value of the property involved.

A major reason for their growth is that lenders seem to want every angle covered and sue solicitors if they get it wrong. There was a spate of this in the mid/late 1990s after the property slump of the early 90s.

Sometimes the risks are so small that a cash buyer might want to take the risk because he would consider it to be very small and worth ignoring. An example of this is with Building Regulations. Once work is over 12 months old Councils are not going to bother with the average domestic extension, loft conversion etc. because they simply have not got the staff resources and time to follow up this kind of thing. Once the work is of any age at all they are going to look very silly from the point of view of the local media pursuing the point.

The problem solicitors have is that it is very difficult to get this kind of common sense view through to a mortgage lender. Say we write to them saying that some work is X years old and their surveyor (apart from wanting to see the consents) has no negative comments about the work itself, and suggest that they might not want to bother with a policy because the likelihood of enforcement is almost nil. They may well pass the letter round their office for a bit because they are not sure what to do with it, then after a delay, send it to their surveyor for his comments. He doesn't want to get sued so he will come up with some totally unrealistic suggestion such as the seller obtaining a regularisation certificate. This will all take time and cost a lot of money if the building inspector wants things to done to remedy some non-compliance that the buyer probably wasn't bothered about! So to avoid wasting time and incurring possible large extra cost we arrange a Building Regulation Indemnity Policy.

In a recent update of the CML Lenders Handbook (the small print that solicitors have to check for lenders) lenders were invited to put a time limit on how far back we had to go in checking for Building Regulation contraventions etc. Very few have given any time limit, which is quite unrealistic in practice.

By the way we do not get any commission for organising these policies! Some firms make an extra charge for organising them on top of the cost of the policy itself, because of the hassle involved!

The insurers that deal with the policies want to minimise their administration and they can do this by confining those who can get the policies to professionals, who can understand the policy terms and the questions that need to be answered. A non-conveyancer might not understand the technical distinctions that can be involved, and a policy might either be invalidated because a wrong answer was given, or the insurer would spend a lot of time explaining it all to the lay person.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients