When buying a property, you may have come across insurance policies that protect you if your purchase does not go ahead as planned. But, what is home buyer’s protection insurance and is it worthwhile?
In short, home buyer’s protection insurance policies cover the costs involved in buying a property (such as legal, mortgage, and survey fees), should the purchase of the property not be completed.
What Does Home Buyer’s Protection Insurance Cover?
Although every insurance policy is different, typically you can expect a policy to cover the following costs:
- Any 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
Naturally, there will be limits to the amount you can claim for each cost. Excesses may also apply depending on the terms of the policy you choose.
In What Circumstances Can You Make A Claim?
Most home buyer’s protection insurance policies will provide cover for a house purchase falling through for any of the following reasons:
- The seller decides to take the property off the market
- Your offer is gazumped by another buyer
- The seller not being legally entitled to sell the property
- The property being subject to a compulsory purchase order (CPO)
- Changes in personal circumstances such as redundancy or the death of one of the purchasing parties
However, keep in mind that the above list is just a rough guide. Each insurance policy will be different. Be sure to check your policy wording before buying your insurance so you know exactly what you are covered for.
Also be aware that some things are not covered. This includes if you simply change your mind about buying a property.
How Much Does Home Buyer’s Protection Insurance Cost?
The cost varies from provider to provider. There are often different levels of cover to choose too, depending on how much protection you want.
Typically, you should expect to pay around £50 for a basic home buyer’s protection insurance policy. For a more premium policy, you’ll be looking at £60-£80.
Premium policies usually provide larger payouts when things go wrong. They may also cover additional costs or reasons for a purchase falling through, too.
How Long Does Home Buyer’s Protection Insurance Last?
Again, this will depend on the exact policy you take out but most policies will cover you for around 120-180 days.
This validity period usually starts from when your offer has been accepted, rather than from when you take out the policy. Therefore, there is nothing to gain by delaying taking the policy out.
Do You Need Home Buyer’s Protection Insurance?
There are no requirements for anyone to have home buyer’s protection insurance in place. It is simply a personal decision depending on whether you feel the cost is worth paying for the peace of mind that, if the sale falls through, you’ll be at least partly covered for the expenses you have incurred.
However, it’s thought that as many as 1 in 3 property purchases fall through before they are completed. Meanwhile, a recent study in London found that 15% of buyers had been gazumped during their house purchasing journey.
That means that, unfortunately, the house buying process is not simple or straightforward. Sales that have previously been agreed can, and do, fall through. Therefore, having some form of financial protection in place can help take away at least some of the stress of moving.
When we last moved house, our main cost was the cost of the solicitors fees. While we looked at Home Buyer’s Protection Insurance as an option, instead we oped for a solicitor that offered it’s own protection.
Basically, their service included a protection element where, if the sale didn’t complete, we wouldn’t be liable to pay their fees.
Naturally, we paid a little more for this but it was essentially a form of Home Buyer’s Protection Insurance given the solicitor fees were our biggest expense.
We were pleased we did have it too as we had to pull out of our first purchase due to a bad survey. We checked with the solicitors before doing so and they confirmed we wouldn’t be charged for their time in working on the purchase, though we still had to pay the fees for the searches that had been done.
Additionally, we forfeited the right to the protection on the purchase of the new property. At this point, we could have taken out a separate Home Buyer’s Protection Insurance policy as a backup but decided to take a risk.
In the end, it all worked out well for us as the second purchase completed without issue.
When Should You Buy Home Buyer’s Protection Insurance?
If required, insurance should be taken out as soon as possible after you have had an offer accepted on a property. That’s because the policy will only become valid once you have bought it, and it will be backdated to the date your offer was accepted.
Besides, most policies need to be taken out within a certain amount of time (often just 7 days) of your offer being accepted. Therefore, there is nothing to gain by delaying taking out your policy, yet plenty to lose.
So, do you feel like some kind of protection against a purchase falling through is a good idea? Make sure you use a good home buyers protection insurance policy to cover yourself as you start the conveyancing process.
We certainly benefitted from the protection we had in place and would definitely consider using Home Buyer’s Protection Insurance on our future purchases.
What Are The Benefits of Home Buyer’s Protection Insurance?
As we have explained, there is no legal requirement to have home buyer’s protection insurance, but it will bring peace of mind should:
- The seller withdraws from the sale or accepts a higher offer from another buyer (gazumping)
- The property is damaged by fire, flood, or subsidence before the completion of the sale
- The buyer or seller dies or becomes seriously ill
- The buyer loses their job or suffers a significant reduction in income
- The buyer’s mortgage offer is withdrawn or reduced due to a change in circumstances or a valuation issue
Home buyer’s protection insurance can reimburse the home buyer for some of the expenses they have already paid, such as:
Essentially, home buyer’s protection insurance is a type of insurance that can protect a home buyer from losing money if their property purchase falls through due to unforeseen circumstances.
However, it doesn’t cover all possible reasons that can cause a home purchase to fail, and it has some limitations and exclusions.
Home buyers should weigh the benefits and drawbacks of home buyer’s protection insurance and shop around for the best policy before buying it.