Indemnity insurance pays for a loss or a legal liability so that you are put back in the financial position you were in, rather than paying a fixed sum. In everyday use people mean one of three things: professional indemnity insurance for mistakes in professional work, a one off indemnity policy bought during a property sale to cover a known defect such as a title problem or missing building regulations consent, or liability covers such as employers’ and public liability.
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What does indemnity mean in insurance?
To indemnify someone is to make good their loss. Most general insurance works this way. The Financial Ombudsman says home insurance policies aim to put the policyholder back in the position they were in just before the loss, and that an insurer can settle by repair, replacement or a cash payment, as long as the method suits the customer and the amount is enough to restore them.
Indemnity also has limits. The Ombudsman notes that an insurer may refuse to pay for work that would leave the customer in a better position than before the loss, although sometimes paying for that betterment is the only fair answer. And if you insure for too little, the insurer may reduce the claim. The Ombudsman gives the example of a home insured for £300,000 that should have been insured for £500,000, where applying average means the insurer pays 60% of the claim, though it rarely finds that fair without a clearly worded policy term.
The idea is not limited to insurers. HM Land Registry, for example, must indemnify a person who suffers loss because the register is corrected or because of certain mistakes in the register or in an official search, under Schedule 8 of the 2002 Act that governs registration.
What is professional indemnity insurance?
Professional indemnity insurance pays compensation and legal costs if a client says your advice, design, accounts or other professional service was negligent and caused them financial loss. Our guides to professional indemnity insurance and what it covers go into detail.
Some professional bodies make it compulsory. ICAEW’s regulations say professional indemnity insurance is compulsory for all members who hold a practising certificate and are engaged in public practice. The standard minimum is £2 million for any single claim and in the aggregate, while firms below the fee income threshold in the regulations may instead hold two and a half times gross fee income, with a minimum of £250,000. After a practice ceases, cover must stay in place for at least two years, and former members must then take reasonable steps to keep it for a further four years.
The Financial Ombudsman has explained in a published decision that indemnity cover tends to be written on a claims occurring or a claims made basis, and that claims made cover responds to claims made during a specific period, usually the policy period, so protection can end abruptly if the policy is not renewed. Accountants can read our page on professional indemnity insurance for accountants.
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What is an indemnity policy when you buy or sell a property?
In conveyancing, an indemnity policy is a single premium policy that covers loss from a specific known problem with a property, so the sale can go ahead without the problem being fixed first. It is usually arranged by the seller’s or buyer’s conveyancer, and the problem it covers is named in the policy. Common examples are:
- defective title, such as a missing deed or a title that is only possessory
- a missing right of way or right to run services over neighbouring property
- a breach of a restrictive covenant
- work done without building regulations approval
Lenders set their own requirements. The government’s Help to Buy (2021 to 2023) handbook for conveyancers, for example, accepted defective title indemnity insurance in some cases but required the policy to cover the borrower, any mortgagees and successors in title, with a limit that initially covered the full purchase price and an escalator clause for future increases in value.
An indemnity policy does not cure the defect. It pays for the loss described in the wording if the risk happens, such as a fall in value.
How does a lack of building regulations consent policy work?
If a previous owner had work done without building regulations approval, the local authority may still be able to act. Section 36 of the Building Act 1984 lets a local authority serve a notice requiring work that breaks the regulations to be removed or altered, and the notice cannot be given more than 10 years after the work was completed. That 10 year period was introduced by the Building Safety Act 2022.
A lack of building regulations consent policy covers the financial consequences of enforcement action of that kind, as set out in the wording. It does not confirm the work is safe or compliant.
The alternative is to have the work checked. Cheshire East Council, for example, says that if you have completed works without building regulations approval you must apply for a regularisation certificate, which lets the council inspect the work retrospectively, and that you may be asked for a completion certificate when you sell or remortgage. The Help to Buy handbook required a building regulations completion certificate before completion rather than accepting indemnity insurance.
Are employers’ liability and public liability indemnity insurance?
Yes. Both pay for your legal liability to other people, so both work on an indemnity basis. Employers’ liability is compulsory: GOV.UK says you must have it as soon as you become an employer, from an authorised insurer, with cover of at least £5 million. You can be fined £2,500 for each day without proper cover. See our guide to employers’ indemnity insurance.
Public liability covers claims from members of the public. The ABI describes it as covering claims for personal injuries, loss of or damage to property, and death. It is not a legal requirement for most businesses, but clients often ask for it. Our page on what PLI insurance is explains the limits contracts ask for, and public indemnity insurance covers the same ground for people who search for it under that name.
Who arranges each type of indemnity insurance?
| Type | What it pays for | Who usually arranges it | Compulsory? |
|---|---|---|---|
| Professional indemnity | Claims that your professional work was negligent | The firm or self employed professional, often through a broker | Where a regulator or professional body requires it, such as ICAEW for members in public practice |
| Property indemnity policy | Loss from a named defect such as defective title or missing building regulations consent | The buyer’s or seller’s conveyancer, as part of the sale | No, but a lender may require it |
| Employers’ liability | Injury or illness suffered by employees through work | The employer | Yes, at least £5 million, with exemptions for close family |
| Public liability | Injury to the public and damage to their property | The business | No, but often required by contracts |
We can look for professional indemnity, employers’ liability and public liability cover for businesses. For a property indemnity policy during a sale, speak to your conveyancer, who knows the defect and the lender’s requirements.
What affects the price of indemnity insurance?
For professional indemnity, insurers look at your profession, fee income, the type of work and clients, the limit and excess, your contracts and your claims history. For a property indemnity policy, the price reflects the defect, the value of the property and how likely it is that someone will act on it. For employers’ and public liability, the trade, the number of staff and where the work is done all count. Ask us for a quote and we will look for cover.
Example. Priya is selling a house where the previous owner removed a wall without building regulations approval. The buyer’s lender wants protection, so the conveyancers agree an indemnity policy for lack of building regulations consent, and the sale completes. Separately, Priya runs a small bookkeeping practice and holds professional indemnity insurance in case a client says her work caused them a loss. The two policies share the word indemnity but cover completely different risks.
Frequently asked questions
Is indemnity insurance the same as professional indemnity insurance?
Not always. Professional indemnity is one type of indemnity insurance. When a conveyancer mentions indemnity insurance, they usually mean a property indemnity policy for a specific defect.
Does a property indemnity policy pass to the next owner?
It depends on the wording. Lender requirements such as those in the Help to Buy handbook asked for policies that cover successors in title, so keep a copy with your deeds and pass it on when you sell.
Can I get a regularisation certificate instead of an indemnity policy?
Often, yes. A council can inspect work done without approval and issue a regularisation certificate, but it may require changes before it does. Ask your conveyancer first, because indemnity policies come with conditions and the order you do things in can make a difference.
What happens if I am underinsured?
The insurer may reduce the claim in proportion to the shortfall if the policy has a clearly worded average clause.
Do I need professional indemnity insurance by law?
There is no general law requiring it, but some regulators and professional bodies, such as ICAEW, require it for their members, and many clients write it into contracts. Our page on when you need professional indemnity insurance explains the common triggers.
Sources
- Financial Ombudsman Service: Settling home insurance claims
- Financial Ombudsman Service: Underinsurance home insurance complaints
- legislation.gov.uk: 8
- ICAEW: Pii regulations effective 1 september 2024.ashx
- Financial Ombudsman Service: DRN 3324098
- GOV.UK: Equity mortgage lenders handbook for conveyancers accessible version
- legislation.gov.uk: 36
- cheshireeast.gov.uk: Completion certificates.aspx
- GOV.UK: Employers liability insurance
- ABI: Voluntary organisations and insurance
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 November 2026. Solar Protect is the trading name of Solar Insurance Services (Medway) Limited, authorised and regulated by the Financial Conduct Authority. This page is general information, not personal advice.