Imagine buying a piece of land only to discover later that a previous owner granted someone else rights that limit what you can do with it—like a neighbor’s right of way or an agreement not to build near a shared fence. That’s called a restrictive covenant. It can affect your property’s value, use, and your peace of mind.
Restrictive covenant insurance protects you from the financial risks if these covenants hurt your plans: it’s not coverage for fire or flood, but legal and financial backup when old property rules pop up unexpectedly.
How Restrictive Covenant Insurance Works
- Title Search
Prior to purchasing a property, a solicitor conducts a title search. Sometimes, restrictive covenants appear—but the buyer would rather close quickly than negotiate changes.
- Policy Issued
A specialist insurer drafts a policy covering losses due to these covenants—maybe you can’t add a garage or fence as planned. - Claim Process
If the covenant stops your plans (delaying a loan, adding costs), your policy pays: legal fees, compensation to affected parties, potentially even the difference in property value.
Real‑World Scenarios Where This Policy Helps
- Planning Permission Denied
You purchase a parcel of land to construct a shed for your home gym.. Then a covenant states you can’t build within 30 feet of the fence. You can’t apply for a permit—policy steps in to protect you.
- Property Deal Fallout
A buyer pulls out because of a covenant limiting parking. Insurer could reimburse any lost deposit or costs. - Mortgage Issue Arises
The lender delays funds until the covenant is resolved. The policy can cover the interest and legal fees until title is cleared.
Key Benefits at a Glance
| Benefit | Description |
| Faster Closures | Don’t waste time renegotiating covenants—secure cover and move ahead. |
| Cost Certainty | Know your legal and remediation limits upfront. |
| Improved Marketability | As a seller, you can offer this insurance to reassure buyers. |
Who Should Consider This Insurance
- Home Buyers with older properties where covenants are common
- Land Developers using historic parcels—for example, extending homes
- Estate Agents & Solicitors who handle property deals and want to reduce delays
- Sellers can boost buyer confidence by offering a covenant policy
What to Look For in a Policy
- Coverage Scope:
Legal fees, loss of value, cancelled sales, remedial costs—make sure they’re included. - Policy Limits:
Limits may range from ₹50 k to ₹5 L or more for commercial deals. - Exclusions:
Value changes due to zoning aren’t covered—only covenant-related issues. - Costs:
Fees depend on property value and covenant complexity—often just a few thousand rupees.
Comparison to Similar Policies
- Title Insurance is broader—it covers title defects, boundary issues, liens, and covenants.
- Restrictive Covenant Insurance is focused and usually cheaper.
- You may buy both; the covenant policy fills the gap if title insurance excludes old covenants.
FAQ
Q: Can I buy this after I’ve moved in?
A: Yes, many insurers offer post-completion cover. But buying before closing is smoother and cheaper.
Q: Is this only for rural or old properties?
A: No—urban homes, apartment complexes, or old subdivisions can all have covenants.
Q: Will the policy cover litigation?
A: Typically, yes—legal costs, loss due to court rulings, and compensation are included.
Final Thoughts: A Niche Solution for Real Risks
Restrictive covenant insurance may be obscure, but it delivers peace of mind for tricky property deals. By addressing a specific yet overlooked risk, you offer genuine value to buyers, sellers, agents, and developers.
