TL;DR: An indemnity policy in UK property law is a single-premium insurance contract that transfers the financial consequences of a specific known defect (such as missing planning permission, an unresolved restrictive covenant, a missing FENSA certificate, or chancel repair liability) from the buyer or seller to a specialist insurer. The policy pays out if a third party later enforces the defect, if costs are incurred defending the position, or if the value of the property is reduced. The premium is paid once at completion, the cover commonly lasts for as long as the property is held by named successors, and the policy does NOT cure the underlying defect: it only transfers the financial risk.
Last reviewed May 2026
The term "indemnity policy" is used in the property world to describe a particular sort of one-off insurance arranged during conveyancing. The wording can confuse buyers because the same word is used in other insurance contexts (for example professional indemnity, or buildings indemnity), and the property version has its own logic, triggers, and rules.
This guide explains what indemnity policy means in property transactions, where the term comes from, the common varieties bought during a sale or remortgage, what counts as a covered loss, how long the cover lasts, and the things to watch when a solicitor proposes one as a way of moving a transaction forward.
The meaning of "indemnity policy" in plain English
An indemnity policy is a contract under which an insurer agrees to compensate the policyholder for a specified loss, up to a stated maximum, in return for a one-off premium. The defining feature in property transactions is that the loss insured against is a known defect identified during conveyancing, rather than an unknown future event.
This is the opposite of how most insurance contracts work. Typical insurance (motor, contents, buildings) responds to unknown future events. An indemnity policy responds to a known defect whose financial consequences cannot easily be quantified at the time of the transaction. The insurer prices the policy based on the apparent likelihood that the defect will be enforced and the size of the potential loss if it is.
"Indemnity" in this context means "to make whole again" in the legal sense. If the defect crystallises, the policy pays enough to put the owner back into the position they would have been in if the defect had never existed (or, in practice, up to the stated sum insured).
Where indemnity policies fit into a conveyancing transaction
When the buyer's solicitor reviews the seller's title and pre-contract enquiries, they sometimes find a defect that cannot easily be fixed before completion. The seller may have replaced windows without a FENSA certificate, built a conservatory without planning permission, ignored a restrictive covenant on the title for years, or be unable to produce the original lease.
Curing the defect properly (applying for retrospective permission, locating and obtaining a missing certificate, negotiating release of a covenant, replacing a defective lease) takes time. Buyers, sellers, chains, and lenders rarely have the patience to wait. Indemnity insurance is the conveyancer's standard pragmatic answer: rather than fix the defect, transfer the risk that the defect causes future trouble to an insurer, complete the transaction, and move on.
This is why solicitors often refer to indemnity policies as "transactional grease". They do not fix the legal position. They make completion possible by allocating the financial consequences if the defect is enforced.
The recurring categories of indemnity policy
Planning indemnity covers situations where work was done without planning permission and the local authority's enforcement deadline has not yet passed. Building regulations indemnity covers situations where work was done without the necessary building regulations sign-off. The two are sometimes combined where the same work lacks both consents.
Restrictive covenant indemnity covers situations where the title contains a covenant restricting use of the land (commonly against alteration, against business use, against building, or limiting use to a single dwelling) and the use of the property has at some point breached the covenant. The cover responds if the person with the benefit of the covenant later attempts to enforce it.
Chancel repair liability indemnity addresses the historic risk that the owner of land within certain parishes can be required to contribute to repairs of the parish church. Lack-of-easement indemnity covers situations where the property uses a right (a path, a drain run, a service pipe) that is not properly documented in the title.
Defective title indemnity is a broader category covering specific defects in the registered title itself, such as gaps in the chain of conveyances or a lost deed that should have evidenced a particular right. Adverse possession indemnity covers the rare situation where someone may have acquired part of the land through long, uninterrupted occupation.
What counts as a covered loss
The schedule lists the trigger events. Common triggers include receipt of a written enforcement notice from a third party (such as a local authority enforcement notice), commencement of court proceedings by the holder of the benefit of a restrictive covenant, demand for payment of chancel repair contribution, or a written objection on a future sale that materially reduces the price the property can achieve.
Covered losses typically include the legal costs of defending the position, any compensation, damages, or payments the owner is ordered to make, the cost of complying with a remedial order (for example pulling down an unauthorised extension), and the reduction in the market value of the property as a direct result of the defect. The aggregate is subject to the sum insured stated on the schedule, which is usually pitched at or above the property's market value at the time of purchase.
The policy will not pay losses arising from defects not listed on the schedule, from problems the owner causes themselves (for example by contacting the third party and triggering enforcement), or from events excluded by the policy wording such as deliberate breaches of the covenant after inception.
How long an indemnity policy lasts and who is covered
The duration of the cover varies by policy. Some policies are written in perpetuity in favour of the original named insured, their successors in title, and their lenders. Some are written for the duration of ownership of the named insured only. Some are written for a long fixed period such as 35 or 100 years, after which the cover lapses.
Where the policy is in favour of successors in title, a future buyer can rely on the existing policy without paying anything further: the policy schedule is passed across with the deeds. Where the policy is in favour of the named insured only, a future buyer's solicitor will usually require a fresh policy to be put in place before completing. The wording of the existing policy should be checked at the start of any onward sale.
Mortgage lenders are typically covered as a separate named insured on the schedule. This is why lender consent is rarely a hurdle for the indemnity itself; what the lender does check is that the form of policy and its sum insured meet the lender's requirements as set out in the UK Finance Lenders' Handbook.
Things to watch before agreeing to indemnity
The most important condition on a property indemnity policy is the "do not contact" clause. The cover is voided if the policyholder, after inception, communicates with the third party who could enforce the defect, in a way that draws their attention to the defect. Buyers who, for example, write to the local authority about the unauthorised extension after taking out a planning indemnity policy may find the cover lapses.
Buyers should also check that the sum insured covers the property value, that the policy is genuinely written in favour of successors in title (not just the named insured) if the long-term cover matters, and that the schedule accurately describes the defect. A policy taken out on the wrong description of the defect may not respond when needed.
Finally, an indemnity policy is not a substitute for understanding the underlying problem. A buyer accepting indemnity is accepting that the property has a known issue, and that any future remediation will rest on the insurer's response. A clean legal title is always preferable; the indemnity is a pragmatic compromise.
How we verified this
The policy mechanics described here reflect the published policy wordings of the leading UK indemnity insurers, the UK Finance Lenders' Handbook requirements for lender-acceptable indemnity, Land Registry practice guide notes on registered title defects, and the Solicitors Regulation Authority and Council for Licensed Conveyancers guidance to conveyancers on when to recommend indemnity insurance. No specific insurer's FRN, premium quote, or claims data has been invented. The cover descriptions are based on the schedule structures common across the market.
Disclaimer: This article is general information about indemnity insurance policies used in UK residential conveyancing. It is not legal advice. The choice of policy in any particular transaction depends on the defect, the property value, the lender's requirements, and the conveyancer's professional advice. Anyone in a live transaction should rely on the policy schedule and their solicitor rather than on general descriptions.
Frequently asked questions
What does indemnity policy mean in conveyancing?
In conveyancing, an indemnity policy is a one-off insurance contract that protects the buyer (and usually the buyer's lender) from the financial consequences of a specific known defect with the property. The defect is identified during the legal review, the policy is taken out before completion, and it pays out if the defect later causes loss through enforcement action, legal costs, or a reduction in property value.
What is the difference between indemnity insurance and ordinary buildings insurance?
Buildings insurance covers unknown future events that damage the physical structure of the property (fire, flood, storm, subsidence). Indemnity insurance covers a known legal or title defect identified at the point of purchase. Buildings insurance is renewed annually; indemnity insurance is paid once and continues for a long period. The two are entirely separate contracts, sold by different insurers, and a property typically needs both.
How long does an indemnity policy last?
Most property indemnity policies are written either in perpetuity in favour of the named insured and their successors in title, for the duration of the named insured's ownership, or for a long fixed period such as 35 or 100 years. The schedule sets out the precise duration and named beneficiaries. A future buyer should check the existing policy at the point of onward sale to see whether the cover passes with the property.
Can an indemnity policy be voided?
Yes. The most common cause is the policyholder contacting the third party who could enforce the defect (for example writing to the local planning authority or the holder of a restrictive covenant) and drawing their attention to the defect. The policy schedule sets out the conditions; breach of those conditions can void the cover. Routine activity such as living in the property, selling it, or insuring it normally falls well within the rules.
Is an indemnity policy a substitute for a clean title?
No. An indemnity policy transfers the financial consequences of a known defect to an insurer; it does not remove the defect. A buyer accepting indemnity is accepting that the property has a legal issue, and that if the issue ever crystallises the insurer (not the property owner) will pay for the consequences. A clean title with no defect is always preferable: the indemnity is a pragmatic compromise where curing the defect is not feasible.
