Search insurance – Cover, Claims and Common Misconceptions

Redbrick SolutionsBy Legal Futures’ Associates Redbrick Solutions

It is estimated that 1 in 3 property transactions require some form of search or indemnity insurance and yet it is often seen as an ‘add on’ to the conveyancing process. Because of the increasing need for insurance, it should be considered as managing risk not just as selling insurance products. Search and indemnity insurance is bought by conveyancers on behalf of their clients and with the new Insurance Distribution Directive (EU legislation that sets regulatory requirements for firms designing and selling insurance products) it is important that conveyancers are confident that the policy they are purchasing is the best available.

Search and indemnity insurance has become a common feature of the residential conveyancing process over recent years. The policies are a popular way of enabling a transaction to proceed in the face of potential problems such as search issues, defects in the title, perceived breaches of historic restrictive covenants or planning permission and/or building regulation issues.  It is vital that all the necessary facts of the case been revealed to the insurance company and that the assumptions on which the offer of insurance has been made are accurate. If the seller takes out the policy, how can the buyer be sure that all the facts have been revealed but if the buyer takes out the policy, does he know all the facts? It is important to check that the right questions been asked of the sellers and that they have they been fully answered.

Search and indemnity insurance policies can ensure that the sales of properties affected by potential issues run more smoothly and quickly and it passes some of the risk from the purchaser to the insurance company. The collaboration between Redbrick Solutions and CLS PI will allow indemnity policies and search insurance policies to be ordered through the Redbrick Solutions Case Management software. These policies will be automatically tagged, tracked and put into the correct matter file. This integration will not only save time, and therefore money, but will also provide full visibility of orders which, in turn, will help manage risk for the practice. If the matter requires a more complex policy, a variable statement of fact can be produced and direct contact with an experienced underwriter is always available.

It is important that the insurance policy is adequate and appropriate to satisfy lenders’ policy criteria. Are the risks covered relevant and sufficient for the purpose for which it has been taken out? There are standard policies but the assumptions made and risks covered by these policies do not always fit the facts of the case and so if the matter requires a more complex policy, a variable statement of fact can be produced for example.  The indemnity limit on policies is usually based on the current market value of the house. Whilst most include an escalator clause, property prices in certain areas can rise in excess of this so the level of cover may be insufficient. If a claim has to be made on the policy, the insurance company may decide to defend the claim which may result in lengthy litigation, making it difficult to sell until matters are resolved.

To find out more, join our complimentary webinar on Search insurance – Cover claims and common misconceptions taking place on 2nd Feb at 11am, register here if you are interested.


Associate News is provided by Legal Futures Associates.
Find out about becoming an Associate


Loading animation