What does 'Indemnity Insurance' mean when buying a property?
Find out what Indemnity Insurance means when you are buying a property. 'What does Indemnity Insurance mean?' plus over 150 other property related terms and jargon in plain English
Where there is an issue with a property that cannot be solved reasonably quickly indemnity insurance can be used.
As an example, 15 years ago a property owner replaced a basement window with a larger one but never got planning permission to do so and he should have done.
You now want to buy the property but what happens, after you move in, if the local authority come knocking at your door and demanding you put things back as they were. That could be costly.
So you take out an insurance policy that says "Should the local authority ever pursue the matter the insurance company will pay the costs".
Indemnity Insurance can be used in much larger situations. Here's a real example:
There is major development in North London which consists of around 50 apartments. The developers purchased the land for it ... except for a small strip between the entrance to the development and the public road because no one could not find the owner of the land. They had been missing and uncontactable for years, perhaps they were no longer even living.
So the building work could go ahead they took out indemnity insurance so that if the owner (or whoever inherited the land after his or her death) ever appeared they would have a multi-million pound pot with which to deal with the situation. It could be used to make the owner a generous offer, fight a court case or in the most extreme situation buy the apartments in the development from their owners because they would no longer have access to them.
To find out more about Indemnity Insurance and other tips and tricks used in property transactions pick up a copy of my ebook How to Really Buy a Property.