What is Home Buyers Protection Insurance?
Estimated reading time 6 minutes
Every house purchase can be one filled with stress. From finalising the move, to booking the removal people, it seems there isn’t one moment where the process is completely harmonious. Factor in the possibility of it all falling through too, and you can add significant concern to an already tiresome situation.
House purchases fall apart all the time for a variety of reasons, and in nearly all cases they end up costing the person hoping to buy an awful lot of cash. There is protection available through, home buyers protection insurance. Home buyers protection insurance is a form of cover that helps cover some of the costs associated with surveying, mortgages, and legal fees. Whilst it won’t bring you back every penny you have spent on attempting to buy the house, the claim, if successful, will help mitigate some of the pain.
Do I need home buyers protection insurance?
It is up to you whether you choose to obtain a home buyers protection insurance policy. There is no legal requirement to have it, but it can be worthwhile. Should your house purchase fall at the final hurdle after you have spent lots of money trying to get it over the line, you’ll find some of those initial expenses partially covered. Opt to remain uninsured, and should the purchase stumble to a halt, all the money you have spent so far is lost for good.
Data has indicated in the past, that 1 in 3 house sales fall through, and whilst that isn’t the majority of purchases, the financial implications for that one-third of people can be quite severe.
Why do house purchases fall through?
There are a variety of reasons for a purchase to fall through and sometimes, they may creep up on you when the completion date is very close, other times it could be much earlier in the process. Unfortunately, an offer being accepted and a mortgage in principle being in place doesn’t stop the process of buying a house from collapsing.
Common reasons for purchases falling through include:
- You have been gazumped- The seller has accepted a higher offer from elsewhere.
- The seller decides they no longer wish to sell.
- The chain collapses as another party in the chain has had their own sale/purchase fall apart.
- You have had to withdraw due to a change in circumstances.
- The survey uncovers that specific work is needed.
- The mortgage lender does not value the property the same as the asking price so withdraws their offer.
What does home buyers protection insurance cover?
Home buyers protection insurance is in place to help protect you as a property buyer for both new builds and existing properties. The levels of protection available are varied, and as a result, the costs will vary too. The higher the cost of protection, the higher the amount you may be able to claim back.
It should be noted though, that not everything associated with a house purchase is covered. Home buyers protection insurance provides cover when your purchase falls through due to events that are out of your control. This means that your policy could cover you if:
- The seller withdraws their property from the market
- You lose your job or are relocated for employment
- The seller is not legally allowed to sell the property to you
- The searches discover that a compulsory purchase order is in place on the property
- You get gazumped
- The surveyor discovers issues with the property that are deemed severe
- The valuation of the property is significantly less than the offer you have made and had accepted.
- The mortgage provider insists that alterations, corrections, or adaptations are carried out before any funds are released and that the total cost of these works exceeds 10% of the accepted offer price.
- After you take out a policy, the property becomes damaged and the repairs are to cost 10% more than the property value.
The policy applies to purchases of new build properties too.
What won’t be covered by home buyers protection insurance?
It would be all too easy for a potential home buyer to lay out significant sums of cash and then take out a policy because they no longer wish to move and expect to be compensated. Claims for reimbursement of costs paid before the policy was taken out are simply rejected. This applies whether you have a change of heart on purchasing the property or whether the seller pulls the plug on the sale. Home buyers protection insurance does not cover the deposit you have paid to secure the property either.
You would also find that home buyers protection insurance will not cover you when:
- You take voluntary redundancy
- You deliberately slow down the process resulting in the purchase not being able to complete
- You have knowledge that the results of a survey completed within the last 90 days could lead to the purchase falling through.
- You use an unlicensed solicitor or conveyancer to conduct the conveyancing.
- The property is not a permanent construction
- The purchase is subject to a contract race or sealed bids.
- A survey has been carried out before the policy begins.
How much does home buyers protection insurance cost?
Costs for a home buyers protection insurance policy will vary depending on the location, the size, and, the value of the home. In addition, the level of coverage you choose will determine how much your policy will cost. Policies could range from well under £100 to well over £100. It is best to obtain a few quotes first to find the best cover for your needs.
How long does home buyer protection insurance cover last?
Typically, this type of insurance lasts for 4-6 months or up to 180 days, but it only covers the property you are buying when you take out the policy. If this purchase was to fall through and you went to purchase another property, you would need a new insurance policy.
When should you take out a home buyers protection insurance policy?
Even though the policy can last as long as six months, you want to secure your cover as soon as the offer has been accepted. This must be before any surveys are carried out, and within 14 days of notifying your solicitor, or mortgage lender of your property purchase.
A property purchase collapsing can be heartbreaking for anyone, especially as it means your sale has to pause too. You can speed up the sales process by using a sell house fast expert like Gaffsy. With our genuine cash offers made on any property, we can ensure you get your house sale completed. We buy any home and can help you sell yours in as little as seven days. Contact our property experts today to see how easy it is.