Home Buyers Protection Insurance
What is Home Buyers Protection Insurance?
Home buyers protection insurance is available to protect you and offers you peace of mind when you’re selling your home. You could say this protection is a bit of a safety net if the worst should happen. If the deal falls through, this insurance may be able to help you claim back legal fees, survey costs, and any mortgage arrangement charges you may have incurred.
As with other forms of insurance protection, there are some things to consider before you buy.
What Does Home Buyers Insurance Cover?
When buying any type of insurance, it’s essential to know what the policy covers. Each policy is slightly different, so it’s essential to read through the entire policy (including the fine print) and ask the insurance broker questions that arise as you study the document.
Here are some of the costs that may be covered by home buyers insurance cover:
- Mortgage arrangements
These are the most common options in a home buyers protection policy; however, each insurer’s policy will be different from their competitors. We can’t stress this enough. It’s important to double check everything that’s covered before buying the insurance. It’s also essential to ask about term limits and any excess you may need to pay (though it’s rare to find excesses included in this type of insurance policy).
You don’t want to get caught by the fine print, so be sure to read it thoroughly. It’s not the most exciting reading material, but you’ll have more information and knowledge about what’s covered by the policy or not.
What is the Risk of a Home Purchase Falling Through?
Isn’t buying a home straightforward? Not always. In the UK, about 1 in 3 property purchases fall through. That’s a pretty high number of property sales that never make it to completion.
The most common reasons for a deal to fall through include the following:
- The seller changes their mind and takes the property off the market
- Gazumping—about 31% of UK homeowners have lost out on a property
- The mortgage lender valuation is lower than the accepted offer
- The mortgage lender insists on rectification work (home repairs, renovations, and more)
- The survey identifies necessary repair work
- The buyer withdraws due to a change in circumstances (such as job relocation, lost job, and more)
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When Can You Make a Claim?
Each home buyers protection policy will vary somewhat in terms of when you can or can’t make a claim. So, again, we want to stress the importance of reading through the entire policy (including the fine print) to know about the insurance product before you buy.
Here are some instances that may allow you to make a claim:
- If the property gets damaged
- If another buyer gazumps you
- If the seller has a change of heart
- If one of the purchasing parties dies
- If you’re made redundant (but not voluntarily)
- If the selling isn’t legally entitled to sell the home
- If the property is subject to a compulsory purchase order (CPO)
This is not an exhaustive list, as each policy will vary and include other instances, with some even excluding some of the issues above. It’s your responsibility to find out exactly what’s covered (or not) in the policy before you take it out.
What Home Buyer Protection Insurance Doesn’t Cover
There are also some things that home buyer protection insurance may not cover, including the following:
- If you, the buyer, pull out
- If your legal fees are refunded
- If you deliberately delay the purchase
- If you don’t instruct a licensed solicitor
- If the property is subjected to sealed bids
- If you have a survey done before you take out cover
While it’s important to check your policy, these restrictions are not likely to vary much between insurers’ policies. No insurer would be willing to settle a claim if you were the one to pull out of the deal!
Frequently Asked Questions (FAQs):
Is Home Buyers Protection Insurance mandatory?
No, Home Buyers Protection Insurance is not mandatory, but it is highly recommended. It provides an added layer of financial security and peace of mind.
How much does Home Buyers Protection Insurance cost?
The cost of Home Buyers Protection Insurance varies depending on factors such as the value of your home, location, coverage limits, and deductible amounts.
Can I get Home Buyers Protection Insurance if I’m buying a condo?
Yes, Home Buyers Protection Insurance is available for different types of properties, including single-family homes, condos, and townhouses.
Will Home Buyers Protection Insurance cover pre-existing damage?
No, Home Buyers Protection Insurance typically covers damages that occur after the policy is in effect. Pre-existing damage is not usually included.
What should I do if I need to make a claim?
If you need to make a claim, contact your insurance provider as soon as possible. They will guide you through the process and help you understand the necessary documentation.
Can I transfer my Home Buyers Protection Insurance to a new owner if I sell my home?
The transferability of Home Buyers Protection Insurance depends on the policy and the insurance provider. Some policies allow for transfer, while others do not.
How Much Does a Home Buyer Protection Policy Cost?
As mentioned earlier, each insurance policy will vary depending on the insurer. So, you may need to shop around to obtain the best price possible for what you’d like to cover. It may be possible to find a home buyer protection policy for as little as £50; however, the more comprehensive the coverage, the more the insurance policy will cost.
The policies that cost the most can be pretty expensive; however, the right thing is to base your decision not on the cost but on buying the protection that’s best for your needs and circumstances.
Commonly Asked Questions About Home Buyers Protection Cover
Is it too late to buy a policy if I’ve already submitted the mortgage application?
It’s possible to take out coverage as long as the application was submitted within 14 days.
I have already instructed my solicitor/conveyancer, am I still eligible?
You can take out a home buyer protection policy as long as the instruction to your solicitor was submitted within 14 days. If you instructed the conveyancer before your offer was accepted, you are eligible for cover within 14 days of acceptance of the offer.
Can I take out cover if I have had a survey carried out?
No, that’s not possible with any home buyers protection policy.
Do I Really Need Home Buyers Protection Insurance?
In most cases, yes, it’s best to have a home buyers protection policy. Buying a home can be expensive. A comprehensive policy is usually pretty affordable, especially when compared to the amount of money that could be lost if a property deal falls through. However, it’s important to choose the right insurance provider and to understand the policy (what’s covered or not) before you buy.
However, home buyers protection insurance is not a legal requirement. So, you can choose to forego buying cover if you’re not worried about all the things that can go wrong with a property deal.