Indemnity Insurance of Pre-deceasing Risks Mortgage Company conveyancing obligations
Natwest and Yorkshire Bank Home Loans, like most lenders, have their own requirements when it comes to pre-deceasing risks indemnity insurance. The purpose of this page to assist property law firms on the different lender conveyancing panel where the title for the the property to be mortgaged incorporates pre-deceasing risks. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be HSBC, Santander or Godiva Mortgages. The content on this page Is not to be read as pre-deceasing risks indemnity insurance advice.
Need help with pre-deceasing risks indemnity insurance from your lender?
Bank of Scotland and Yorkshire Building Society like many mortgage companies, requirements are that where pre-deceasing risks indemnity insurance is to be taken out:
- you must approve the terms of the pre-deceasing risks policy on behalf of the mortgage company
- the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the pre-deceasing risks indemnity insurance policy should be effected at no cost to the bank
- the pre-deceasing risks indemnity insurance policy should not incorporate terms which you are aware would invalidate or compromise the interests of the bank
- your practice must reveal to the insurer all relevant information which you have gathered
- your firm must supply a duplicate of the pre-deceasing risks indemnity insurance to the mortgagor and explain to the mortgagor why the pre-deceasing risks indemnity insurance policy was effected and that a further policy may be mandatory if there is further lending against the security of the property
- your firm must point out to the mortgagor that the borrower must adhere to any conditions of the pre-deceasing risks indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance
- the pre-deceasing risks indemnity insurance policy must be in favor of the mortgage company and, wherever possible, in favour of the mortgagor and any subsequent owner or bank. Where the mortgagor will not be protected by the pre-deceasing risks indemnity insurance policy, you must advise the borrower of this fact.
| Lender | Requirement |
|---|---|
| Accord Mortgages | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| Barclays plc | Higher of purchase price or valuation |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Habito | Higher of purchase price or valuation |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Investec | The open market value of the property according to the valuation report. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| Lloyds TSB Scotland | The value of the property |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Pepper Money | An amount equal to at least 110% of the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
General Pre-deceasing Risks indemnity insurance points to consider
The extent of the terms for pre-deceasing risks indemnity insurance are identified in the policy document. Conveyancing Practitioners should direct the borrower to the pre-deceasing risks indemnity insurance policy paperwork. The intention of pre-deceasing risks indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Significant characteristics and benefits of pre-deceasing risks Contingency insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the pre-deceasing risks indemnity insurance schedule. Pre-deceasing Risks indemnity insurance Policies should be checked for the following- The cost of altering or taking down all, or part of the development and the reinstatement of the land, insofar as such alteration, demolition or re-instatement is made necessary by court order.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- The cost of works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the pre-deceasing risks policy, to the extent that such costs are rendered abortive by court order.
- Market value reduction resulting from the successful enforcement of the risks specified in the pre-deceasing risks policy.
- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the pre-deceasing risks insurance, including fees of a legal nature.
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the pre-deceasing risks policy.
As with any insurance policy, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the pre-deceasing risks policy will be invalidated.
Pre-deceasing Risks Indemnity Insurance has limitations - Additional considerations
Pre-deceasing Risks Indemnity insurance isn’t a solution to all of the relevant problems. Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the bank solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most pre-deceasing risks Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information is in relation to properties in England and Wales.