Buying a home is an exciting process. But until you get those front door keys, there's always the horrible possibility that things just might fall through.
Before a sale is completed, buyers have to pay for legal costs and searches, surveys and mortgage arrangement fees.
Together, these costs can quickly run into thousands and if the sale falls apart, you could be left badly out of pocket.
Taking out Home Buyers' Protection Insurance can at least protect your bank balance, while you muster up the energy to start the search all over again.
1. What is Home Buyers' Protection Insurance?
Home Buyers' Protection is an insurance policy that covers you for the loss of expenses you’ve shelled out for while preparing to buy a new home.
It kicks in if the sale of the property you're trying to buy falls through.
2. Why would a house sale fall through?
There are lots of reasons a sale might not reach completion. You or the seller might pull out at any time leading up to the exchange of contracts.
Sometimes sales fall through very early on because someone else has made the buyer a higher offer, even though they’ve accepted yours.
This is called gazumping. And Home Buyers' Protection Insurance is sometimes referred to as gazumping insurance for this very reason.
Things can change further into the sales process, too. You might have a survey conducted and decide not to proceed if it throws up difficult or expensive issues.
Something could also happen further up a buying chain and the people selling to you have to pull out, or your buyers might even pull out, leaving you unable to complete the purchase.
3. What does Home Buyers' Protection Insurance cover and how much does it cost?
Your insurance will cover your costs in the event that something out of your control happens to stop the sale. It doesn’t cover you if you simply change your mind about buying the home.
It will cover some or all of your costs, for example if the person you’re buying from pulls out of the deal, or the mortgage you need to buy the home isn’t granted.
In many cases, a survey revealing major problems, or something unexpected thrown up by local searches, will also be covered.
It should also cover gazumping, which is when a seller accepts a higher offer from someone else.
As with any insurance policy, the details vary. So be sure to read yours carefully and thoroughly.
Likewise, the cost of Home Buyers' Protection Insurance varies on a case by case basis.
Prices start at around £70, but you can expect to pay more than a couple of hundred pounds for the most comprehensive cover.
4. Are there limits to the amount I can claim back on Home Buyers' Protection Insurance?
Yes. Policies differ and how much you can claim depends on how much you paid for your policy.
On a basic policy, you're likely to be able to claim legal fees up to £750, mortgage arrangement fees up to £250 and valuation fees up to £500.
But a more expensive policy will mean you can claim more, or even the entirety of what you have spent on trying to buy a home.
5. Do I need Home Buyers' Protection Insurance?
You don’t have to have Home Buyers' Protection Insurance. It’s not a legal requirement and you can proceed with any sale without it.
But, buying a home is an expensive process. So spending a couple of hundred quid to protect yourself against losing several thousand in fees and buying costs might make sense.
6. When in the moving process do I buy insurance?
You can buy Home Buyers' Protection Insurance as soon as you have had an offer accepted.
But it will also have to be within a set time period. For example, within a week of instructing your solicitor to start on the conveyancing work.
7. How long does the Home Buyers' Insurance cover last?
Typically this type of insurances lasts from 120-180 days from the day you buy the policy.
That means you'll have up to six months to complete before you need to renew your cover.
8. Do I need Home Buyers' Insurance if I’m buying in Scotland?
In Scotland, an offer must be honoured once it’s been accepted. But home sales can fall through for a host of other reasons outside of gazumping.
So, whether you're buying in Scotland, England, Wales or Northern Ireland, Home Buyers' Protection Insurance could be worthwhile cover.
There are several key differences to buying a home in Scotland and elsewhere in the UK. Find out more in this guide.
9. How do I make a claim on my Home Buyers' Insurance?
If you need to make a claim, simply contact your insurer.
You’ll find details of the best way to get in touch on your policy documents. You'll be asked to quote your policy scheme reference and schedule number.
They are likely to ask you to provide supporting information. This might be an email showing you’ve been gazumped or proof that your lender won’t give you a mortgage.
10. Is there an excess to pay if I claim on my Homebuyers' Insurance?
It’s unlikely. These types of policy tend to come without an excess.
11. How long will it take for the insurance money to come through?
This will vary from case to case but most claims should be paid out in a matter of days.
12. What should I watch out for?
Home Buyers' Protection Insurance will not cover expenses incurred before the policy was in place. So your claim would be rejected if you bought cover after being gazumped.
Also, insurers will only pay out for events that have stopped the sale which are outside of your control. These are known as 'insured events'. That means you can’t claim if a sale collapses simply because you’ve changed your mind.