Legal Indemnity Insurance
Legal indemnity insurance is the cover that is obtained to provide protection to buyers and lenders, should there be a defect in the title which cannot be resolved. It does not remedy the defect, but offers financial compensation. There might be some specified actions which may nullify the covessr and the policy must be checked for such a clause. Indemnity policies also have a condition that the policy holder should never reveal them to third parties.
Property transactions must be done with utmost care, else there is every possibility that issues may arise in the future. Some of these issues may be regarding title, restrictive covenants, searches etc. among others.
In the event of an irresolvable defect being present in the title, legal indemnity insurance is what will offer more protection to the buyer as well as the lender. An indemnity insurance policy will cover loss of value to the property as well as the legal costs incurred.
Legal indemnity insurance is a fast as well as relatively inexpensive option when there is a lot of legal work involved in rectifying defects in the title.
Indemnity Insurance PremiumFor legal indemnity insurance, the premium needs to be paid only once. Moreover, it also gets transferred to the successors in the title and continues to last for the life of the property.
Depending on the value of the property and the risk insured, the premiums charged for indemnity insurance policies may vary. The premium is charged on a sliding scale and some insurance firms also lay down a fee for arranging the cover.
Arranging indemnity policy is much easier now because of the availability of online services. You will require an account with the insurance company for this purpose. In case you are carrying out the legalities related to conveyancing on your own, you can arrange the policy through post. You also have the option of asking your buyer or seller to arrange for the cover and adding the premium or deducting it from the purchase price.
A Few Defects Covered by Legal Indemnity InsuranceIndemnity insurance is good enough to cover most title defects like lack of rights, adverse possession, breach of covenant, lack of planning/building regulations approval and unknown easements. Here are 3 examples of defects you may find in titles:
1. Lack of RightsWhen a part of the property is accessed over a private land without any legal right to do so, or if any services such as drains or cables servicing the property cross private land, legal indemnity insurance may be used. When usage of such rights is challenged, this insurance provides cover against financial losses suffered in such an event.
2. Adverse PossessionWhen you have possessory title to property but do not have sufficient proof to satisfy the Land Registry about your ownership, someone else may claim to have ownership of the property. With legal indemnity insurance, you can obtain cover against financial costs involved in defending such a claim.
3. Flying Freehold Indemnity InsuranceWhen a part of a property overhangs a neighbouring property, it results in flying freehold. In such a case, you must have the right to enter the other property if your property needs any repairs and should also have a benefit of a covenant. If such a right and covenant is not there, the title to the property is deemed defective, in which case indemnity insurance can protect you against loss.
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