The case for buildings and contents insurance is clear: these covers protect your home (the building itself for buildings and the possessions contained within for contents) and your investment. The right policies and levels of cover can really deliver peace of mind, ensuring your property is adequately safeguarded. That said, the case for indemnity insurance can be a bit less clear. Most people are not aware of what it is – or if they should purchase it.
What is indemnity insurance? What does it cover? And do you need it?
What Is Indemnity Insurance?
Indemnity insurance is very different from either buildings or contents cover. For example, if lightning strikes a tree and it crashes down on your roof, you need buildings insurance in order to make necessary repairs. If a pipe bursts and ruins your carpet and furniture, your contents cover will come into play. Indemnity won’t protect you against these types of misfortunes.
Instead, it is a cover that protects you should a third party make a claim regarding a specific issue related to your property. That didn’t clear matters up much, did it? Let’s look at an example: say that you bought a house and the seller did not or could not supply you with a building regulation certificate. If your local authority decides to pursue a claim because you do not have the appropriate certificate, you could be facing some serious financial hardships – but not if you purchased an indemnity policy.
If you did, in this case, you would be indemnified, or compensated for the cost.
Here are some other types of indemnity insurance:
- Restrictive Covenant Insurance. If you buy an older property, it may have a deed with provisions that limit the use of the property in some respect. This is a restrictive covenant. An example would be that you have to give your neighbours access to a well on your property as it is written into the deed. If the prior owner broke that agreement and it becomes a problem, then indemnity covers you.
- Planning Permission Insurance. If the person from whom you bought the house-made modifications or alterations without planning permissions or in violation of permitted development rights, the local authority could decide to take action. Here, you would be protected.
- Indemnity for a Boiler. If the previous owner did not supply an installation certificate, it may be a good move to get a policy in case something goes wrong. It won’t pay for damage related to a boiler but rather for the cost of any legal problems that may arise.
- Windows Indemnity. If you did not receive a FENSA certificate from the previous owner for windows and doors, the local authority may take action if the installation does not comply with building regulations. Again, indemnity insurance covers this cost.
Indemnity insurance can cost anywhere from £20 to £300, depending on both the value of your property and what the cover protects against. But do you need it? As you can see, these are very specific forms of insurance that do not apply to every homeowner. The best course of action is to ask for advice from your solicitor, conveyancer, estate agent, lender and/or insurance company to determine if any of these policies are right for you. But if you have any of these rather unique needs, then it is well worth it. If you spend, say £50 on windows indemnity and the local authority takes enforcement action, then you are covered or compensated for this cost. This can save you hundreds of pounds or more.
Indemnity insurance is a one-off payment, so you do not need to worry about paying annually. That is another key difference between this type of cover and buildings and contents insurance. It is protection against something that could happen in specific circumstances – which is really what all insurance coverage is about!
If you do not receive all of the requisite paperwork (e.g. boiler certificates, window installation certificates, building regulations, planning permissions etc.), then it may be worth your time and your money to investigate different forms of indemnity insurance.
Some people don’t need them at all and never give it a thought. Others do. You do not want to be among the latter and not have this protection if a problem arises. Better safe than sorry, as they say. Turns out, “they” are quite right in this instance.