Some property transactions are swifter than others, some take weeks to complete and unfortunately, some property purchases fall through altogether. Whatever the reasons for this, the parties involved can be left out of pocket from upfront expenses incurred when buying property, such as legal advice or property surveys.
Home buyers protection is a type of insurance policy you can take out to cover yourself against exactly this kind of situation. Prices start at a one-off premium of around £49, for a more premium policy, you’ll be looking at £60-£80.
What it covers
- Legal fees incurred during the conveyancing process
- The costs of any surveys or valuations you have had conducted
- Mortgage arrangement fees that you’ve already paid
Read the policy wording for full details on your cover but situations that home buyers protection policies usually cover include:
- Withdrawal
- E.g. gazumping – your accepted offer gets gazumped by another offer over £1,000 or more or:
- The property that you are purchasing is withdrawn by the seller
- Survey
- The survey reveals that the property needs work that will cost 10% more than your offer
- Unforeseen barriers raised by local authorities
- Relocation – Your employer asks you to relocate
- Redundancy – You’re made redundant
- Valuation – The lender’s valuation is less than 95% of your offer
- Death – You or any other policyholder dies
Policies tend to come without excess and most claims are paid in a matter of days but occasionally this takes longer. Note that policies will only cover ‘insured events’ – explained in further detail below.
What it won’t cover
Policies won’t cover expenses which were incurred before the policy was in place, known as ‘retrospective claims’. For example, your claim would be rejected if you bought cover after being gazumped. Also, the policy will only pay out for events which are outside your control – known as ‘insured events’. For example, you can’t claim if a property purchase collapses simply because you’ve changed your mind as the buyer.
Claim limits
There are limits to the amount you can claim back but policies differ both in terms of amount and type of fees covered. For example, you could be able to claim conveyancing fees up to a maximum of £750, mortgage arrangement fees up to £250 and valuation fees up to £500.
Duration of cover
Typically cover lasts from 120-180 days from the day you buy the policy, leaving up to six months for you to exchange and sale complete.
Should I get a home buyers protection policy?
Unlike buildings insurance for property owners, this type of insurance isn’t compulsory but it’s well worth considering when entering into any property purchase. Upfront fees can run into hundreds of pounds, during a period when your outgoings are typically large and savings crucial.
In Scotland, an offer must be honoured once it’s been accepted but house sales can still fall through for reasons other than gazumping. So, whether you’re buying in Scotland, England, Wales or Northern Ireland, Home Buyers Protection Insurance is usually worthwhile cover to purchase.
When should I get it?
You can purchase Home Buyers Protection Insurance as soon as you’ve had an offer accepted. The policy will only become valid once you’ve bought the property and will be backdated to the date your offer was accepted if applicable. But it will need to be taken out within a certain amount of time (often a week) of your offer being accepted / you instructing your solicitor to start on the conveyancing work. In short, there’s nothing to be gained from delaying taking out your policy, but there is plenty to lose.
For more information on the features, benefits, exclusions and limitations of Home Buyer’s Protection policies, please read the Paymentshield’s Home Buyers Protection policy.