Do I Need Indemnity Insurance to Sell a House?

Selling a house can feel a little bit like an endurance test. You find a buyer, agree on a price, and start to organise your move. Then, the property sale enters the conveyancing stage – the legal process of transferring ownership to the buyer.

This can be one of the most stressful parts of selling a home. There’s solicitor back-and-forth, paperwork to find, and, if you’re in a chain, the worry that another sale could fall through.

During these legal checks, missing paperwork or a historical issue with the property can cause unexpected delays. It’s at this point your solicitor may mention an ‘indemnity policy’.

You don’t automatically need indemnity insurance to sell a house. However, if a legal issue comes up, your buyer or their mortgage lender may ask for a policy before they’ll proceed.

Key takeaways

• You don’t automatically need indemnity insurance to sell a house. A buyer or their mortgage lender may request it if legal checks reveal missing paperwork or another property issue.
• Indemnity insurance protects against financial losses covered by the policy. It doesn’t fix the underlying problem, provide missing approval, or prove building work is safe.
• Price varies. Many standard policies cost around £20 to £500, depending on what you’re covering. This is paid only once.
• The seller often pays, but this is negotiable. The buyer can pay instead, or both parties can split the cost. 
• Speak to your solicitor before contacting the council about missing approval. For some policies, contacting the council can affect whether insurance is available. 
• Cash buyers may still ask for indemnity insurance. Having no mortgage lender doesn’t remove the need for legal checks. However, many cash buyers – like Good Move – cover your solicitor costs.

What is an indemnity insurance?

When buying or selling a home, indemnity insurance is a specialist policy that covers financial losses from a specific legal issue with a property. This could be missing approval for an extension or uncertainty about whether you have the legal right to use shared access.

In simple terms, it’s a legal backup plan. The policy doesn’t resolve the underlying issue or give council approval where it wasn’t previously in place. Instead, it provides financial protection if the issue leads to a claim or enforcement action covered by the policy.

This guide focuses on selling a property in England and Wales – policies can vary in Scotland and Northern Ireland. If an indemnity policy is suitable, it can offer a practical way to address a legal concern without holding up the sale while you try to resolve it.

Why has my solicitor asked for an indemnity policy?

Your solicitor, or the buyer’s solicitor, may ask for an indemnity policy after checking the property’s legal documents.

During conveyancing, the buyer’s solicitor reviews the Land Registry records, local authority searches, and other paperwork relating to the property. If they spot a legal gap or a missing record, they’ll ask for more information.

Common reasons for requesting property indemnity insurance include:

• Missing certificates: For example, there’s no building regulations completion certificate for a loft conversion, or no FENSA certificate for replacement windows.
• Historic building work: An extension or alteration doesn’t have evidence of the planning permission it needed.
• Missing deeds or documents: A document referred to in the property’s title can’t be found, leaving uncertainty about rights or restrictions affecting the property.
• A breached restriction: Previous work may have broken a restrictive covenant, which is a rule in the property’s title limiting how it can be used or altered.

Being asked for a policy doesn’t necessarily mean something is physically wrong with your home. It may simply mean the buyer needs protection against a risk that the available paperwork doesn’t resolve.

 

 

Why might the buyer’s mortgage lender require it?

If, later on down the line, the buyer can’t repay their mortgage, the lender may eventually have to sell the property to recover its money. That’s why mortgage lenders will check for any legal issues that reduce the home’s value or make it harder to sell.

For example, if an extension is missing the necessary approval, the lender may want insurance against financial losses that could occur if the council takes action in the future. So, they might ask for this cover – the indemnity insurance – to be put in place before they agree to release the money for the buyer to complete the purchase. 

Missing paperwork doesn’t automatically mean you need insurance. The buyer’s solicitor will check what the lender requires, and your solicitor can explain whether an indemnity policy would help your sale go ahead, or whether the issue needs another solution. 

What does indemnity insurance cover?

Each indemnity policy covers a particular risk. You’re buying protection against the issue identified during conveyancing, rather than general cover for everything that could go wrong with the house.

Examples include:

• Building regulations indemnity insurance: Can cover financial losses if the council takes action because building work doesn’t have the required approval. For example, you’re selling a house with a loft conversion, but there’s no completion certificate showing the work was approved under building regulations. A policy could protect the buyer against certain financial losses if the council takes action in the future. It doesn’t give the conversion itself approval or confirm that it’s safe. 
• Lack of planning permission cover: Provides protection against specified losses if the council takes action over work carried out without the necessary planning permission. For example, a previous owner built an extension that required planning permission, which they never obtained. Indemnity insurance could cover financial losses if the council takes action over the missing permission. 
• Restrictive covenant cover: Some properties have legal rules limiting how they can be used or altered. This insurance can cover financial losses if someone takes legal action because a rule has been broken. For example, the property’s legal documents say no extensions can be built without the original developer’s consent. A previous owner built one without asking. Insurance could protect the buyer if someone with the right to enforce that rule takes action.
• Missing legal rights for access or services: Addresses the financial risk of someone challenging access or services used without an established legal right, such as a driveway or drains crossing private land. For example, you use a shared passage beside the neighbouring house to reach your back garden, but the property documents don’t confirm your right to use it. If a neighbour were to challenge that access, indemnity insurance can protect the buyer against financial losses. 
• Missing documents cover: Protects against certain claims arising from rights or restrictions in missing documents. For example, the property’s ownership record refers to a deed from 1930 containing restrictions, but no copy can be found. Insurance could protect the buyer if someone later produces it and makes a claim based on a restriction it contains.
• Chancel repair liability cover: Covers a historic liability affecting some properties, where owners may have to contribute towards repairs to a parish church’s chancel. If the church makes a valid demand for payment, insurance could cover the buyer’s liability. This kind of demand is much less common – it is rarely enforced and doesn’t affect most people, as it is linked only to specific land or properties that historically supported the parish rector. 

Depending on the policy, a claim may cover legal expenses, compensation, or a reduction in the property’s value. Some planning and building regulations policies also cover the cost of complying with an enforcement order, such as altering or removing the affected work.

However, indemnity insurance isn’t a guarantee that building work is safe. It doesn’t generally pay to repair poor workmanship simply because a defect is discovered. The buyer may still need a survey or further checks.

Do I need indemnity insurance when selling a house?

There’s no general legal requirement to take out indemnity insurance when selling a house. Whether you need it depends on the issue, the available alternatives, and what the buyer and their lender will accept.

Sometimes, your solicitor can resolve a query by finding an existing certificate or clarifying the title. In other cases, insurance may be a quicker, more practical option than correcting the underlying legal problem.

Before agreeing to a policy, ask your solicitor what it covers, why it’s needed, and whether there’s another suitable way forward. If you already have a policy from when you bought the property, share it with them. It may still provide suitable cover.

Who pays for indemnity insurance, the buyer or seller?

So, whose responsibility is indemnity insurance: the buyer, or the seller? 

The seller often pays where missing paperwork or a legal issue with their property is holding up the sale. It can be a relatively small cost compared with the expense and disruption of finding another buyer.

However, there’s no fixed rule. The buyer can pay, or both parties can agree to share the cost. Your solicitors can confirm the arrangement before the policy is purchased.

The policy usually protects the buyer and their mortgage lender against the insured risk. For the seller, the main benefit is helping the sale proceed. Don’t assume it also covers you against every future claim or expense: that depends on who is insured and the policy wording.

Who pays for indemnity insurance, the buyer or seller?

You can decline to pay for a policy, but this may affect whether your sale goes ahead.

The buyer might agree to pay instead, or their solicitor might accept another solution. However, if the buyer or lender insists on cover and no agreement is reached, the sale could be delayed or fall through.

Discuss your options with your solicitor before refusing, particularly if you’re relying on the sale to fund your next move.

Can contacting the council affect the insurance?

Yes. For some policies, contacting the council about unauthorised work, applying for retrospective approval, or approaching someone who could enforce a restriction can make cover unavailable or affect an existing policy.

Speak to your solicitor before contacting the council or another relevant party about the issue. If you’ve already made contact, tell your solicitor so they can check what options remain. You should still answer the buyer’s enquiries honestly.

How much does indemnity insurance cost?

Many standard residential indemnity policies cost between around £20 and £500, although more complex risks or higher-value properties can cost more. The price depends on the type of issue, the property’s value, and the amount of cover required.

Your conveyancing solicitor will usually arrange the policy through a specialist insurer. Ask for the total cost, including any fee for arranging it, before agreeing to proceed.

Unlike most home insurance, property indemnity insurance usually involves a one-off payment, rather than an annual premium or ongoing cost. Many policies remain in place indefinitely and automatically cover future owners and their lenders.

However, the terms matter. A policy may have conditions that affect its continued validity, and its cover limit may need increasing as the property’s value rises. You should keep a copy with your property documents so it’s available for any future sale.

Do I need indemnity insurance if I’m selling to a cash buyer?

Selling to a cash buyer can give you more flexibility because there’s no buyer’s mortgage lender setting conditions for the purchase. However, a cash buyer may still request indemnity insurance to protect against a legal risk.

The property still needs to go through conveyancing, and missing documents or title issues still need to be considered. A cash sale can simplify the process, but it doesn’t remove the legal checks completely.

At Good Move, our cash house buying service offers an alternative if you’re looking for a more straightforward sale. When we buy directly, there’s no onward buying chain, and we can consider properties with issues that may make an open-market sale more difficult.

If missing paperwork is worrying you, explain the situation to our team from the start. We can discuss the property with you, while the solicitors establish what’s needed for the sale to proceed.

We cover legal costs when you use our recommended solicitor, or contribute £500 towards the fees if you choose your own. But you don’t need to have made the decision before speaking to us – that’s what our friendly team is here for. Find out how selling to Good Move works and get in touch for a free, no-obligation cash offer.