Indemnity insurance risks for lack of building regulations
- Flickr: Colour Houses
Like many insurance schemes, indemnity insurance for building regulations (or lack of regulations) can be taken out by a property owner as a means of gaining additional finance. Indemnity insurance is subject to strict criteria which must be met before a policy is offered; most criteria ensures the risk of payout is low, so a company is not likely to offer a policy if there's a high chance of local authority enforcement.
12 Month Period
As with most enforcement by a local authority, they will normally only take action within 12 months of work being carried out. You can't take out indemnity insurance for building regulations if the work was carried out less than 12 months ago, as it is still possible for a local authority to place enforcement. After the 12 month period it becomes unlikely that a local authority will bother with lack of building regulations, unless the infringement is serious.
You can't take out indemnity insurance for building regulations unless a survey or report has been carried out on the work, ensuring it is safe and assessing the risk of local authority involvement later down the line. If the building work suggests any adverse problems with the building work you're not likely to receive a policy because the insurer will suspect a local authority is more likely to go to the extra hassle of enforcement or that the homeowner might being attempting an insurance scam.
Local Authority Awareness
To reduce the risk of payout no company will offer indemnity insurance if a local authority has, in any way, been made aware of building regulation infringement. This includes approaching a local authority yourself or being approached by the said authority (the former cannot have taken place before the policy has been taken out).
Some homeowners attempt to gain an insurance payout and apply for indemnity insurance for lack of building regulations. They will approach a local authority after the insurance has passed and hope to receive a payout for any financial loss (including the value of their home) should a local authority place enforcement. However, this is why the extra measures above are put in place by insurers; a local authority will not place enforcement after the initial 12 months unless the infringement is serious and the valuation report ensures no serious defects in the building work will result in local authority enforcement after the 12 month period. If you contact a local authority yourself after taking out indemnity insurance for lack of building regulations, your policy will be voided.