First time buyer guide

 

Home Buyer’s Protection Insurance

Home purchases fall through more often than you would imagine. But, did you know that the money you pay upfront when you buy a property can be protected? Read on to see if home buyer’s insurance could be for you.
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Once you’ve set your heart on a property and made an offer, you’ll be surprised at how fast the cash you need to put towards various costs starts adding up. Before you know it, you may have spent hundreds or even thousands of pounds in fees. 

All the hard-earned money you’ve invested in securing your new home could be lost if the purchase falls through. A recent study by Quick Move Now found that a quarter of property purchases in England and Wales fell through in 2019. This can end up costing buyers £2,900 on average.

But you could make the setback less painful by taking out insurance. 

What Is Home Buyer’s Insurance?

It’s a type of policy that covers the loss of some expenses you’re likely to have made – legal, survey and mortgage lending costs, for instance – when your offer to buy a home has been accepted but the purchase falls through.

Why Do Property Purchases Fall Through?

Some of the most frequent reasons are:

  • Gazumping: the seller accepts a higher offer from another buyer
  • The seller takes the property off the market
  • The property chain collapses
  • The  mortgage lender’s valuation is lower than the accepted offer
  • The survey highlights repair work that needs to be done
  • You or your buying partner die, become terminally ill or are made redundant 

Read our article Why Home Purchases Fail & How to Avoid It for a more detailed look at how to tackle this issue.

How Does Home Buyer’s Insurance Work?

There are a number of insurers offering home buyer’s protection policies. Some points to note about this type of insurance: 

  • Gives you four to six months cover depending on the policy
  • Can be cancelled for free within the first 14 days
  • Gives you seven days to buy the policy once your offer for the property has been accepted formally and in writing by the seller 
  • Ends when the term of the policy is over, if you cancel it, if you complete on the purchase or if you make a claim 
  • Depending on the level of cover expect to pay around £52 to £89

What Does Home Buyer’s Insurance Cover?

Home buyer’s insurance typically covers:

  • Solicitors/conveyancing and search fees
  • Survey and mortgage valuation fees
  • Mortgage arrangement fees
  • Gazumping 

What’s Not Covered by Home Buyer’s Insurance? 

Home buyer’s insurance will not cover expenses incurred before the policy was in place. Plus, the policy will only pay out for events which are outside your control. So, for example, if the property purchase collapses because you’ve changed your mind, you won’t be able to claim.

Some of the circumstances which you wouldn’t be covered for include:

Getting  a survey done before you take out the policy

You must get a survey done on the house once you take out insurance. If you don’t and the purchase fails, you won’t be able to claim and you’ll have to pay for both.

Not instructing a property solicitor or conveyancer

The policy may not be valid if you don’t use a licensed conveyancing solicitor to deal with your property purchase.

Causing a delay

If you cause a deliberate delay once your offer has been accepted, this can result in the property purchase falling through. Your insurance wouldn’t cover you in this instance. 

Being able to get a refund on your fees

If you’re able to get a refund on the legal and other fees you’ve paid, you won’t be able to claim on your insurance policy.

Changing your mind

Decided the property is not right for you? Want to keep searching for the perfect place? You’re entitled to do so but, unfortunately, your home buyer’s insurance won’t cover you for changing your mind. 

Taking voluntary redundancy

You won’t be able to claim on the policy if you terminate your employment voluntarily. This also applies if you’re self-employed or a company director or partner of the company giving notice of redundancy. 

Do I Need Home Buyer’s Insurance?

Unlike buildings insurance, for example, this type of cover is not compulsory. So deciding whether or not it’s right for you can be difficult. Think about the risks involved in buying your home versus the cost of taking out protection insurance.

Having a home buyer’s protection policy in place can’t stop the purchase of your dream property falling through, but it can give you some peace of mind at a crucial time in the process of becoming a homeowner.