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Guidance Regarding Indemnity Insurance Policies

Where there is a title defect in your sale or purchase an indemnity insurance policy will often be obtained. This is standard conveyancing practice and benefits all future owners. Your Conveyancer will obtain the draft indemnity insurance policy from a known provider and ask you to review it.

As the seller you will need to review the policy assumptions (also called the statements of fact). It is important that the assumptions are true and correct as otherwise the policy is invalidated.

As the buyer you take the benefit of the policy and it is vital that the policy is not invalidated so you should read the terms and conditions and not do anything that breaches them. Take note of the policy definitions, terms, limit of indemnity and also how to make a claim.

Indemnity insurance

Indemnity insurance does not solve the problem. It insures you under set circumstances but it is not a cure all.

Your Conveyancer can give no warranty as to the validity or effectiveness of the policy, or the success of any claim. You can easily invalidate an indemnity insurance policy so read it carefully.

The existence of these policies must not be disclosed to anyone, other than a bona fide purchaser or your mortgage lender, without the written consent of the Insurer. You should not make any admission of liability, offer any promise of payment or incur any costs or expenses without the consent of the insurer as you will invalidate the policy.

The initial one-off premium is based upon the current market value of your property. As time passes, often the market value increases, and when you are selling or remortgaging, additional payments may be required to ‘top up’ the policy to increase the limit of indemnity. It is impossible to foresee the cost of any future top up payments required.

The success of any claim is not guaranteed. Insurers will only pay out under certain circumstances.

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