Questions about indemnity insurance

Find out what IDA Indemnity Insurance covers and get advice on what to do before, during, and after a claim when you file one.

Please be aware that IDA does not provide indemnity insurance. If you require an insurance quote, please get in touch with our partner, Gjensidige Forsikring, via the provided contact form.

What is indemnity insurance?

Indemnity insurance protects the buyer and mortgage lender from property value loss due to defects.

What is the difference between Building and Indemnity Insurance?

The main difference between building insurance and indemnity insurance is what they cover. Building insurance covers damage that may occur after you take over the house, such as damage caused by a storm or heavy rain. On the other hand, indemnity insurance covers damage to the house before you took ownership, for example, if the previous owner installed illegal plumbing or electrical installations.

What does indemnity insurance cover?

Indemnity insurance is designed to cover the cost of repairing hidden defects in a house, provided that the specific conditions that define "damage" are present. Although it may get a bit technical, the original definition of a "defect," according to the Danish Parliament, included the following criteria:

• Breakage
• Leakage
• Deformation
• Deterioration
• Cracking

The destruction of the building or other physical conditions significantly reduces the value or utility of the house compared to similarly aged homes in generally good condition.

On the takeover date, a defect must be present. Some typical faults in indemnity policies include roof defects, subsidence damage, and illegal electrical and plumbing installations.

What is not covered by the insurance?

Coverage exceptions include those mentioned in the surveyor's and electrical installation reports, damage from age, wear and tear, poor maintenance, and planned renovations.

What is a hidden defect?

As a buyer, it is essential to note that any errors or defects not mentioned in the condition and electrical installation reports are considered hidden. It means that you should have a comprehensive understanding of the house's condition and defects. In case of hidden defects, it is advisable to have an indemnity insurance policy as it covers such defects. If you do not have indemnity insurance, you will be responsible for all expenses related to correcting the hidden defects.

How long does an indemnity policy last?

You have the option to choose between a five-year or ten-year insurance cover. If you opt for a five-year policy, you can extend it for another five years, but you must do so at least five days before the expiry date. Remember that buying a ten-year cover is usually more cost-effective than extending a five-year policy.

Does the insurance cover all faults and defects not named in the reports?

There is a popular online myth among some organisations and companies that indemnity insurance covers all hidden defects. However, this is not true. The insurance policy only covers hidden defects if such defects cause damage or if there is a high risk that it will cause damage that significantly reduces the value or functionality of the building compared to similar housing of the same condition and age.

What are the differences between indemnity insurance products in the market?

Most insurance providers offer identical standard coverage for indemnity insurance, as the government mandates. This coverage remains the same, regardless of whether you choose a five or ten-year term. However, some companies provide additional insurance coverage to complement their indemnity insurance.

What does indemnity insurance cost?

The cost of insurance premiums can vary from company to company, which is why it's wise to obtain several quotes. It's essential to compare the prices and clauses of each company's policy before deciding.

Regarding who pays for the insurance, the seller is responsible for 50% of the insurance quote price provided by the estate agent as part of the purchase agreement. However, you can obtain additional quotes and select a different insurance provider as a buyer. If you opt for a more expensive indemnity insurance policy, the seller must only cover half of the insurance quote you choose.

It's worth noting that IDA Forsikring doesn't offer insurance for a change of ownership. If you require indemnity insurance, please get in touch with our partner, Gjensidige Forsikring, using the provided contact form.

Should I take out building and indemnity insurance with the same insurer?

You don't have to use the same provider.

Does indemnity insurance benefit both the seller and the buyer?

Insurance benefits both buyers and sellers in a property transaction.

As a seller, you can be released from the 10-year seller's responsibility by submitting a condition report, electrical report, and a binding offer for an Indemnity Insurance policy. You must offer to pay half of the insurance cost, and the proposal must be presented to the buyer before the sales agreement is signed.

On the other hand, as a buyer, you will be secured against any unforeseen expenses, such as damages not indicated in the condition report. You can take out Indemnity Insurance for 5 or 10 years. While it may not be mandatory, it is highly recommended to opt for this insurance to avoid any risks.

If you do not get indemnity insurance, you will be responsible for any repair costs that may arise after the purchase of the property. Therefore, getting this insurance can protect you from any unpleasant financial surprises.