Having a property purchase fall through, is stressful, emotional and pricey – all at the same time. But you can buy insurance to protect yourself.
How does Home Buyers Protection Insurance work and exactly what do you get for your money? Here’s the lowdown on this type of cover.
What is Homebuyers Protection Insurance?
A policy that covers you for the loss of upfront expenses you’ve made in good faith to buy a property – legal, survey and mortgage lending costs, for example – in the event of the purchase falling through.
What exactly does it cover me for?
This insurance covers gazumping (where a seller accepts an offer from one buyer and rejects it later in favour of a higher offer from someone else). This is a practice that’s on the rise again, according to recent reports.
It also covers events such as the seller pulling out (perhaps due to being made redundant), or you not qualifying for the mortgage you need to buy the home (usually this means less than 90% of the price you have offered).
In many cases an adverse survey or something unexpected thrown up by the local authority search will also be covered - please read the policy wording for full cover details.
Are there limits to the amount I can claim back?
Yes, but policies will differ. 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.
When in the Move process do I buy it?
You can purchase Home Buyers Protection Insurance as soon as you have had an offer accepted on the property you want to buy. But it will also have to be within a set period, ie. a week, of instructing your solicitor to start on the conveyancing work.
How long does the cover last?
Typically from 120-180 days from the day you buy the policy – which means you have up to six months to complete.
How much does it cost?
You’ll pay a one-off premium, with prices around £50.
What if I’m buying in Scotland?
Even though in Scotland, an offer must be honoured once it’s been accepted, house can fall through for a host of other reasons outside gazumping.
So, whether you are buying in Scotland, England, Wales or Northern Ireland, Home Buyers Protection Insurance could be worthwhile cover.
How do I make a claim?
If you need to make a claim, simply call the claims line number which you’ll find on your policy documents. You’ll need to quote your policy scheme reference and schedule number.
Is there an excess to pay if I do?
Policies tend to come without excess.
How long will it take for the money to come through?
This will vary from case to case. Most claims should be paid in a matter of days.
What exclusions should I watch out for?
Home Buyers Protection Insurance will not cover expenses 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.
The policy will also only pay out for events which are outside your control – known as ‘insured events’. For example, you cannot claim if a property purchase collapses just because you have changed your mind.
When wouldn’t I need it?
This kind of cover, unlike buildings insurance for example, is not compulsory. However, it’s well worth considering when entering into any house purchase. Upfront fees can run into hundreds of pounds at a time of when money is typically in scarce supply.