What is homebuyers protection insurance and what’s it for?

Key takeaways

• Homebuyers protection insurance reimburses costs you've spent, such as survey and legal fees, if your house purchase collapses for reasons outside your control.
• It's not a legal requirement and won't stop a sale from falling through. It simply softens the financial blow afterwards.
• Cover usually ranges from £1,000 to £3,000, with premiums typically starting around £70 to £80 and increasing for higher levels of protection.
• It's separate from gazumping itself, legal indemnity insurance, and standard home insurance, all of which do very different jobs.
• Whether it's worth buying usually comes down to how much you've already committed to spend and how far along the chain you are.

Disclaimer: This guide primarily covers homebuyers protection insurance and the buying process in England and Wales. Property transactions work differently in Scotland and Northern Ireland.

Why buyers start asking about this insurance

House purchases in England and Wales aren't legally binding until contracts are exchanged. The gap between agreeing a price and exchanging contracts can run for weeks or months. This is exactly where things tend to go wrong. A seller changes their mind, a survey uncovers something nasty, or a chain further along collapses and takes your purchase down with it.

None of this is rare. It's the reason a small, niche insurance product exists for people in the middle of buying a home. Understanding what it actually does and what it leaves out matters more than the marketing blurb suggests.

What is homebuyers protection insurance?

Homebuyers protection insurance is a short-term policy that reimburses money you've spent on a house purchase, such as survey and legal fees, if the purchase falls through for a covered reason, usually before exchange of contracts.

It's sometimes called home buyers insurance, buyer protection insurance, or abortive purchase insurance, and you'll find it sold under all of these names by insurers, mortgage brokers, and even some conveyancing firms as an add-on product.

The policy usually kicks in once you have something to lose financially, meaning after your offer is accepted and you start paying for surveys, searches, and legal work. It runs until completion, when you no longer need it because the deal has gone through.

It's clear from the outset that this is not insurance for the property itself. It has nothing to do with buildings or contents cover and won't protect your mortgage repayments if you lose your job. It only covers money already spent on a purchase that never completes.

What does homebuyers protection insurance cover?

Most policies cover survey fees, conveyancing and legal costs, mortgage valuation fees, and sometimes mortgage arrangement or broker fees, provided the sale collapses due to specified reasons like the seller withdrawing, a failed survey, or a lender pulling the mortgage offer.

The exact list of "specified reasons" varies between insurers, but the common triggers tend to include:

• The seller withdraws from the sale, including certain cases of gazumping, subject to the policy’s conditions.
• A structural or legal problem is uncovered during the survey or searches that makes the property unmortgageable or unsafe.
• Your mortgage lender withdraws or reduces the mortgage offer through no fault of your own
• The seller dies or becomes seriously ill before completion.
• A chain collapse further up or down the line causes your specific purchase to fail.

Most policies will reimburse approximately between £500 and £3,000 depending on the tier you choose, covering costs like:

• Survey and valuation fees, subject to the policy limit
• Conveyancing legal fees and disbursements already incurred
• Mortgage valuation and arrangement fees
• Sometimes a contribution towards search fees

If you're comparing quotes for a survey or conveyancer, do that early. Our conveyancing quote comparison tool and surveyor comparison service let you see exactly what you'd be committing to before you commit.

Pro tip: Ask for an itemised quote from your conveyancer and surveyor before buying any protection policy. Our guide to conveyancing fees explains what to look for when comparing legal costs.

What doesn't homebuyers protection insurance cover?

Homebuyers protection insurance won't pay out if you change your mind, if you already knew about a problem before buying the policy, or if the purchase fails due to your own mortgage application being declined. Exclusions vary substantially between providers, so always check the policy wording.

Common exclusions include:

• You deciding not to proceed for personal reasons unrelated to the property or seller
• Any issue you were already aware of before taking out the policy
• Your own mortgage application being rejected because of your finances, credit history, or affordability.
• Delays that don't actually result in the purchase falling through (annoying, but not insurable)
• Costs for work not yet paid for, since you can only claim back money you've genuinely spent.

It also won't cover emotional distress, lost time off work, or potentially the removal deposit if you'd already booked a removal firm. If you're at the stage of booking removals before exchange, it's generally sensible to hold off on any non-refundable deposits until contracts are exchanged.

How is homebuyers protection insurance different from gazumping protection?

Gazumping protection is commonly included within homebuyers protection insurance, rather than being a fundamentally different type of cover. It's simply one of the specified events that a homebuyers protection insurance policy covers, alongside failed surveys, lender withdrawal, and chain collapse.

There's no way to insure against being gazumped in the sense of stopping it from happening. What the insurance does is reimburse you for the money you've lost if it does happen.

Some buyers try to reduce the risk of gazumping by asking sellers to sign a lock-out agreement, which is a separate legal document preventing the seller from negotiating with other buyers for an agreed period. It's not insurance, and it doesn't guarantee anything, but combined with a homebuyer's protection policy, it gives buyers a bit more security on both fronts.

What's the difference between homebuyers insurance and legal indemnity insurance?

Legal indemnity insurance protects against specific legal defects in the property's title or planning history, while homebuyers protection insurance covers your abortive costs if the whole purchase collapses. They solve completely different problems.

This confusion comes up a lot, so it's worth spelling out clearly:

Your conveyancer will usually flag if legal indemnity insurance is needed, typically after searches come back with an issue such as an unauthorised extension or a missing guarantee.

How much does homebuyers protection insurance cost?

Premiums for homebuyers protection insurance typically range from £70 to £200 for cover of between £1,000 and £3,000, depending on the insurer, the level of cover chosen, and how far along you are in the process.

Cost is usually driven by three things: the amount of cover you want, the property price (higher-value purchases mean higher fees at risk), and how close you are to exchange when you take the policy out.

Some conveyancing firms offer no sale, no fee conveyancing, where you don't pay your conveyancer's professional legal fee if the transaction falls through, subject to the firm's terms. It's worth asking your conveyancer directly whether this applies before paying separately for overlapping cover. You may still have to pay searches, disbursements or other third-party costs depending on the company’s terms.

You can compare fixed-fee conveyancing quotes, including firms offering no completion no fee terms, through our conveyancing comparison tool.

How common are failed house purchases in England and Wales?

Estimates vary, but industry and government commentary commonly suggests that around one in three agreed property transactions in England and Wales fail to reach completion.

The exact figure varies depending on market conditions, mortgage rates, and chain complexity. Still, one underlying issue remains: contracts aren't binding until exchange, leaving a long window in which either side can withdraw. The Conveyancing Association has campaigned for reform of the system, including greater use of upfront property information through initiatives such as the Buyer's and Seller's Property Information (BASPI) dataset. Our guide to the latest digital conveyancing reforms explains how the government's wider plans aim to make transactions faster, more transparent and less likely to fall through.

Is homebuyers protection insurance worth it?

Whether homebuyers protection insurance is worthwhile depends on your circumstances, the costs you could lose if your purchase falls through, and the protection offered by the individual policy.

Before buying a policy, check which costs it covers, the maximum amount you can claim, the circumstances in which it will pay out and any exclusions or time limits. It is also worth checking whether your conveyancer offers no completion, no fee terms, as this may reduce some of the costs you could lose if the transaction falls through.

Compare the potential financial loss with the cost and level of cover before deciding whether the policy is right for you. If you're unsure, consider speaking to a qualified insurance broker or financial adviser.

Pro tip: If you're buying and selling at the same time, ask whether your policy covers costs on both transactions. Some only protect the purchase, not the linked sale, which matters a lot if your own buyer pulls out and takes your onward purchase down with it.

When should you buy homebuyers protection insurance?

The best time to buy homebuyers protection insurance is as soon as your offer is accepted and before you start paying for surveys, searches, or legal work, since most policies won't cover costs incurred before the policy started.

How do you make a claim on homebuyers protection insurance?

To claim, you'll need to provide evidence that the purchase has genuinely collapsed, confirmation of the reason from your conveyancer or estate agent, and receipts or invoices for the costs you're claiming back.

Insurers typically ask for:

• Written confirmation from your conveyancer that the transaction has been terminated.
• The reason for the failure, matched against the policy's list of covered events.
• Proof of payment for survey, legal, or valuation fees you're claiming
• Any relevant correspondence showing the seller withdrew, the lender pulled the offer, or the chain collapsed.

Claims times vary between insurers and may depend on how quickly you provide the required evidence. It's worth keeping every invoice and email related to your purchase from day one, just in case, rather than scrambling to find them after a collapse.

Ways to reduce the financial risk of a purchase falling through

Homebuyers protection insurance isn't the only way to limit how much you could lose if a purchase falls through. You can also check whether your conveyancer offers no completion, no fee terms and understand exactly which costs would still be payable if the transaction fails.

Some buyers also consider a lock-out agreement, which can restrict a seller from negotiating with other buyers for an agreed period. However, this involves additional legal work and does not guarantee that the purchase will complete.

Whatever approach you take, check the terms carefully and make sure you understand which survey, legal, search and mortgage costs you could still be responsible for if the transaction falls through. Our guide covers 10 questions to ask your conveyancing solicitor before you instruct

Comparing conveyancing quotes and checking what happens if the transaction falls through can help you understand your potential financial exposure before you instruct a firm.

Getting it right from the start

Homebuyers protection insurance won't stop a sale from collapsing, and it won't make gazumping illegal, but it does mean a failed purchase costs you a lot less if the worst happens. For most buyers, the decision comes down to how much you've already spent, how long your chain is, and how competitive your local market feels.

Whatever you decide on insurance, getting quotes from reliable, transparent professionals at every stage reduces your risk in the first place. Compare conveyancing quotes through Moving Compared to find a solicitor with fair, upfront fees and clear no completion no fee terms, so you know exactly what's at stake before you even think about insuring it.