At Towerstone, we provide specialist property accountancy services for homeowners, landlords, and property investors. We have written this article to explain what indemnity insurance covers, helping you make informed decisions.

This is a question that often comes up partway through a sale, usually after a solicitor raises a concern or a buyer’s lender asks for extra protection. For many sellers, indemnity insurance feels confusing and unnecessary, especially if they have lived in the property for years without any problems. Others worry it means something is seriously wrong with the house.

The reality is that most house sales in the UK do not require indemnity insurance at all. However, in certain situations, it can be a practical and relatively inexpensive way to keep a sale moving when a technical issue arises. It does not fix a problem, and it does not mean the property is unsafe, but it can provide reassurance to buyers and lenders where perfect paperwork is missing.

In this article, I will explain clearly when indemnity insurance is needed, when it is not, what it covers, and why it is so commonly used in UK conveyancing. This reflects how sales actually work in practice rather than worst case scenarios.

What indemnity insurance actually is

Indemnity insurance in a property context is a specialist insurance policy that protects against a specific legal risk related to the property’s title or history. It is usually taken out at the point of sale and lasts indefinitely.

The policy does not repair defects or change the legal position. Instead, it provides financial protection if a problem arises in the future and causes loss.

Typical policies protect against things like enforcement action, legal challenges, or loss in value arising from a known issue.

A key point that often reassures sellers

Indemnity insurance is very common.

It is used daily across the UK property market and does not mean your house is defective or unmortgageable. In most cases, it is simply a pragmatic solution where paperwork is missing or a historic technical issue cannot easily be resolved.

Many properties that change hands with indemnity insurance go on to be sold again later with no issues at all.

When you do not need indemnity insurance

In the majority of straightforward house sales, indemnity insurance is not required.

You usually do not need it where:

• The property has all the correct planning permission and building regulations documentation

• The title is clear and registered with HM Land Registry

• There are no boundary, access, or rights issues

• Any alterations were carried out with the correct approvals

• There are no breaches of covenants or restrictions

If everything is in order, the sale proceeds without any insurance being discussed.

Why indemnity insurance comes up during a sale

Indemnity insurance is usually suggested when a solicitor identifies a risk that is low probability but difficult or impossible to remove completely.

This often happens with older properties or homes that have been altered over time.

Rather than delaying the sale to investigate something historic, insurance is used to satisfy the buyer and their lender.

Common situations where indemnity insurance is requested

There are several scenarios where indemnity insurance commonly arises.

One of the most frequent is missing building regulations approval. For example, a loft conversion, extension, or removed wall may have been completed years ago, but the completion certificate cannot be found.

Another common issue is lack of planning permission for older works. In many cases, the work is immune from enforcement due to age, but lenders still want protection.

Boundary discrepancies also trigger insurance, where fences or walls do not align perfectly with title plans.

Rights of way issues, such as access over neighbouring land without clear documentation, are another frequent cause.

Restrictive covenant breaches can also lead to indemnity insurance, where a property has been altered in a way that technically breaches an old covenant but has caused no practical issue.

Why buyers and lenders like indemnity insurance

From a buyer’s perspective, indemnity insurance provides reassurance that they will not suffer financial loss if a problem arises later.

From a lender’s perspective, it protects the value of their security. Mortgage lenders are often the driving force behind indemnity insurance requests, even where buyers themselves are relaxed.

Lenders are risk averse by nature, and insurance is often the fastest way to satisfy their requirements without reopening historic issues.

What indemnity insurance actually covers

The cover depends on the type of policy, but in general it may cover:

• Legal costs if enforcement action is taken

• Compensation or loss in value if the issue affects the property

• Costs associated with defending a claim

It usually does not cover the cost of carrying out the work properly after the fact, and it does not protect against problems you already know about and have disclosed inappropriately.

What indemnity insurance does not do

It is important to understand the limits.

Indemnity insurance does not:

• Make unauthorised work compliant

• Prevent enforcement action from happening

• Cover poor workmanship

• Cover issues you deliberately bring to the attention of authorities

• Replace the need for honesty in disclosure

It is a financial safety net, not a cure.

A crucial rule sellers often miss

Once indemnity insurance is proposed, you must not contact the relevant authority about the issue.

For example, if the issue is missing building regulations, contacting the council to ask for retrospective approval will usually invalidate the possibility of insurance.

This is why sellers should always take legal advice before trying to resolve historic issues themselves.

Who usually pays for indemnity insurance

In many cases, the seller pays for the policy as part of the sale.

This is not a legal requirement, but it is common practice because the issue relates to the seller’s period of ownership.

That said, policies are usually relatively inexpensive, often costing a few hundred pounds, and are a one off payment rather than an ongoing cost.

Sometimes buyers agree to pay, particularly in competitive markets or where the issue is minor.

How long indemnity insurance lasts

Most indemnity insurance policies last indefinitely.

They usually cover:

• The buyer

• Future owners

• Mortgage lenders

This means the protection stays with the property rather than the individual.

Does having indemnity insurance affect future sales

In most cases, no.

When the property is sold again, the existence of an indemnity policy is often sufficient to satisfy the next buyer and their lender.

In fact, many properties accumulate layers of indemnity insurance over decades, covering different historic issues.

When indemnity insurance may not be enough

There are situations where indemnity insurance is not appropriate.

For example, where there is an ongoing dispute, known enforcement action, or a serious structural issue, insurance may not be available or acceptable.

Insurance is designed for low risk, historic, technical problems, not active or high risk situations.

Can indemnity insurance be refused

Yes.

Insurers may refuse cover if:

• The issue is too recent

• The risk is too high

• The authority has already been contacted

• Enforcement action is underway

• The problem is well known and ongoing

This is another reason not to alert authorities without advice.

Is indemnity insurance a sign something is wrong with the house

Not necessarily.

In many cases, it simply reflects how property law and record keeping worked decades ago. Older homes often predate modern paperwork requirements.

A missing certificate does not mean the work was unsafe, just that records were not kept in the same way.

How sellers should approach indemnity insurance requests

If indemnity insurance is raised during your sale, the best approach is calm and pragmatic.

Your solicitor will explain:

• What the issue is

• Why insurance has been suggested

• Whether it is the best option

• What alternatives exist

In most cases, agreeing to a policy avoids delay and keeps the sale on track.

Should you arrange indemnity insurance in advance

Usually, no.

There is little benefit in taking out indemnity insurance before a buyer raises an issue. Policies are tailored to specific risks and buyers’ concerns.

It is better to wait and deal with issues as they arise through the conveyancing process.

Common myths worth clearing up

Indemnity insurance does not mean your house is defective.
It does not reduce the value of your home.
It is not unusual or suspicious.
It does not imply wrongdoing.
It is often the simplest solution.

Understanding this reduces unnecessary worry.

The cost versus benefit perspective

From a financial point of view, indemnity insurance is often very good value.

Paying a few hundred pounds to avoid delays, renegotiation, or a failed sale is usually sensible.

Trying to fix historic paperwork problems can be slow, expensive, and sometimes impossible.

Final thoughts from real world experience

So, do you need indemnity insurance to sell your house. In most cases, no. Many homes sell perfectly well without it.

However, where a technical or historic issue arises, indemnity insurance is often the quickest and least stressful way to satisfy buyers and lenders and allow the sale to proceed.

In my experience, sellers who approach indemnity insurance pragmatically rather than defensively have far smoother transactions. It is not about hiding problems, it is about managing low level legal risk sensibly.

Indemnity insurance is a tool, not a judgement. When used appropriately, it keeps house sales moving and protects everyone involved without drama.

If you would like to explore related property guidance, you may find do you have to have home insurance and can i name my house useful. For broader property guidance, visit our property hub.