Home buyers protection insurance is it worth it?
Many people face challenges when purchasing a property which is why home buyers insurance is often necessary. These challenges are a result of the expensive nature of the process and the numerous requirements needed. Most homebuyers are not aware of some of the crucial steps to take when purchasing a property. Whether you are a first-time buyer or an experienced investor, you are likely to encounter these challenges.
In recent years, statistics show that 4 in 10 homes face risks of a sale falling through. It is more than what is expected. Most people do not know what is home buyers costs insurance. The home buyer’s cost insurance helps you protect your money after making a home purchase request.
What is Home Buyers Protection Insurance
Soon after homebuyers find a property they wish to purchase, they start paying lawyers, surveyors, and mortgage advisers to provide them with legal advice before completing the purchase. Finally, all these expenses add up and become a huge amount. Due to risks of sale falling through, one might lose if the seller opts to withdraw from the deal.
The importance of taking the home buyers’ cost insurance is to protect you from losing your money if the seller changes their mind about selling the property and exchanging of property falls through. It also covers numerous other risks if the worst happens. It provides certainty, especially for first-time homebuyers.
Taking the home buyers’ costs insurance helps one in claiming some expenses associated with home buying. Such fees include valuation and survey fees, Conveyancing solicitors costs, and mortgage or lenders fees.
When searching for a insurance provider ensure the supplier is authorised and regulated to provide you with home buyers protection insurance. You want your insurance to be regulated by the financial conduct authority to ensure you are being supplied by a insurance broker who is officially registered in England. When buying a house and you require insurance, there are companies that can occasionally commit insurance fraud, costing you more than you were trying to save when looking for buyers insurance..
Important Documents When Applying For Home Buyers’ Insurance
1. IPID
IPID is an insurance product information document that has detailed information about the policy cover. It comes with the policy wording that provides full details regarding the policy. There is also information on the areas covered by the policy and states the limits of the cover. Furthermore, it explains the limitations of each cover and any other exceptions.
2. Needs and Demands
The needs and demands are the actual insurance policy that will cater to the costs and expenses if the purchasing process falls. The maximum amount paid depends on the level of cover purchased. It usually ranges from £1600 to £2250.
3. Policy Wording
The policy wording contains vital information on the type of cover you choose. It is important to go through the document thoroughly alongside the IPID to gather full details about the policy cover.
4. Disclosure
Homebuyers should provide full and accurate information in this section. Clients should provide accurate answers to the questions asked. The answers provided by clients form part of the statement on which the policy will depend on.
If the answers provided change, one is required to report and make changes as soon as possible. Failure to report may invalidate the policy, and claims will not be paid. One must strictly observe the terms and conditions of the policy to benefit from the buyers’ costs insurance policy.
5. Payment
For the policy to be valid, one should pay the premium as agreed in the signed agreement. The premium is paid as a one-off payment at the beginning of the policy agreement. One can use a debit or credit card or use a BACS transfer.
Cover Restrictions
- During the period of insurance, all claims should be reported after you become aware of changes that may lead to a claim.
- Clients are discouraged from deliberately causing a delay or use unreasonable behaviour that may result in a failed purchase.
- The buying of the property is not subject to an agreement or sealed bids
- One must use a solicitor or licensed conveyance to conduct the conveyance of the property
- For the policy to be active, applicants should not survey the property
- Applicants should make an offer to purchase the property, and the vendor, in writing, should accept the purchasing request
- An agreement should be made in principle in case of a mortgage on the property
- The policy cover is provided within three working days from the date you instructed the legal practitioner.
What is covered by the Home Buyers’Insurance?
a) Withdrawal From Sale Due to Gazumping
Severally house vendors may decide to disembark on an agreement made due to an alternative offer. The cover protects the homebuyer if the vendor withdraws from the sale agreement due to an alternative offer. The alternative offer should be more than £1000.
b) Withdrawal By The Seller Due to Other Reasons
Sometimes the sale process might not be successful due to reasons caused by the seller. The policy covers such scenarios when the seller opts out of the agreement due to unknown reasons.
c) Untimely Legal Search
Property legal search is examining public records to determine and confirm the true owner of a property. The search is also important in determining the claims and liens on such properties. A qualified lawyer or solicitor always conducts this process. The policy covers any costs incurred due to unfavourable legal search.
d) Property Valuation
The policy covers a situation where the lenders’ valuation is less than 90% of the total amount you have offered.
e) Structural Defects
Any structural defects lead to a revised valuation. The valuation should be at least 10% below the original price offered by the property buyer.
f) Terminal Illness
The cover compensates if one is diagnosed with a terminal illness that makes them unable to continue making payments toward the purchase of the property.
g) Bankruptcy
The insurance policy covers any costs if one cannot proceed with payment due to redundancy.
h) Damage to the Property
The Home Buyers’ costs insurance covers any damage cost, which is more than 10% of the investment value.
Types of Covers in the Home Buyers’ insurance
When purchasing the Home Buyers’ costs insurance, it is important to learn about the two different covers. These covers include:
Platinum Cover
- The cover consists of a Conveyancing fee of up to £1,100.
- Valuation and survey fees of up to £750
- Lenders and mortgage arrangement fees of up to £400
- Maximum cover of up to £2,250
Gold Cover
- Survey and valuation fees of up to £550
- Mortgage arrangement and lenders fees of up to £300
- Conveyancing fees of up to £800
- Maximum cover of up to £1,160
What are the Risks Associated with a Sale falling through?
A study conducted in the past years found that almost 30% of property purchases fall through, making buyers lose a significant amount of money. Not taking up the right cover has made most buyers lose their money paid for Conveyancing, survey, and valuation. It calls for the importance of taking out the correct insurance cover when purchasing any property.
The cover increases one’s confidence even if the seller decides to withdraw from the agreement or takes off the property.
Main Reasons why Sales Fall through
i) Gazumping and Gazundering
Many times sellers decide to withdraw from the sale agreement. One of the main reasons sellers withdraw their property from a sale is receiving high offers from other parties. This action refers to as gazumping.
Gazundering is when the buyer lowers the offer on a property they have shown an interest in.
ii) The Value Provided by the Mortgage Lender is Lower Than the Accepted Offered
When purchasing a property, many people visit mortgage dealers to help in valuing the property. In some cases, the mortgage experts tend to give a lower property value than the accepted offer. In turn, the property owner may decide to withdraw from the deal.
iii) Surveys
It is important always to survey the property to protect yourself from buying a property with numerous problems. Such problems are the main reasons why most house sales fall through. Poorly conducted surveys account for very few property transactions falling through as minor defects can be put right or adjustments made to the property’s price. This action calls for negotiation between the buyer and seller.
When the property is found to have some structural defects, the buyer naturally pulls out from the deal. This action leads the seller to address the issues raised from the survey before finding a potential buyer of the property.
In cases where the survey discovers major structural defects, sale agents are prohibited from selling the house without informing the potential buyers about the defects even if the issues are solved. Scenarios where the issues found are left unsolved, the price needs to be adjusted accordingly. In this case, the property becomes suitable for cash buyers only.
iv) Lack of Finances
Approval from a mortgage company does not mean that financing will always go ahead. The lender might change their mind due to the nature of the mortgage offer.
v) Chains
Chains are a major problem when buying and selling property. A study found that one out of five property transactions falls through due to broken links. There are numerous reasons why chains break. A short chain or no chain is the most preferred, but it isn’t easy to find such scenarios.
How do you claim in Home Buyers’ costs insurance?
The logging process is quick and easy. Once you create a profile on the portal, you can make a claim anytime throughout the year. You can also contact the customer care center through their phone number.
For your claim to be successful, ensure that you comply with the policy wording for the insurer to accept and resolve the claim promptly.
Below are the simple steps to follow when making a claim:
- Sign in to the customer portal and log your claim with a few clicks
- Once you log the claims, complete the claim’s form
- Your claim is transferred to insurers for validation and processing
What services are offered by Home Buyers’ costs Insurance?
A. Rent Guarantee insurance
The company provides a rent guarantee policy covering unpaid rent of up to £15000 for 12 months. The landlord is protected with £25000 of legal expenses insurance.
B. Landlord Buildings and Contents Insurance
The policy covers buildings, accidental damage, content, loss of rent due to defaulters, and any other liabilities.
C. Tenant Liability Services
The company offers a tenant liability policy cover for up to £5000 within one year for accidental damage.
D. Tenant Deposit Replacement Insurance
The insurance provides:
One year cover
The insurance policy provides cover for one year from the start date. The renewal fee is £99 and is payable if the policy is renewed every 12 months.
Legal fees cover
It covers up to £50000 legal expenses to pursue a former tenant for dilapidations to the property at the end of the tenancy contract. It also applies in cases where the tenant absconds from the let property before obtaining the dilapidation record.
6-week rent
It applies in a scenario where negotiations do not lead to an agreement. The company will pay dilapidations that are equivalent to 6 weeks rent.
E. Landlord Home Emergency Insurance
This service covers:
- Plumbing works- it includes burst pipes that lead to leakages in the property
- Heating- failed hot water heating
- Failure of the central heating system, which includes the boiler
- Burglary and break-ins that compromises the security of homes and should be reported to the police
- Toilets: failure of the main toilet that results in water leakage that would lead to damage or rendering the toilet unsafe for use
- Roof- damaged, missing, or repositioned roof tiles that are likely to affect the safety of the property.
- Vermin- the removal of beehives, wasp nests, mice, and other pests from the property
F. Landlord Legal Expenses
The Home Buyers’ Costs insurance provides stand-alone legal expenses for landlords of up to £50000. Landlords can use the toll-free number to make a claim.
Other services offered by the insurance company include;
- Key protection insurance
- Tenant referencing
- Gas safety certificate
- Insurance referral form
Next step to Take
Purchasing a property can be an exciting experience but could turn out to be the worst if not carefully done. Taking home buyers’ protection insurance protects potential buyers from losing money if the sale falls through. Protect yourself from uncertainties that come with buying a home by taking the right insurance cover.