How Does Legal Expenses Cover Work?

This may not be an automatic cover as quite often the policy will dictate that the holder will need to contact the insurance company prior to incurring any legal expenses and make a statement that they are very confident of winning their case. If an offer of settlement is made then the policy holder is normally required to accept this.

The way that this works is that after a claim is received the insurance company will conduct an assessment of the situation often calling upon their own in house solicitors for advice on the dispute. The point of this is to determine whether the policyholder has a good case or not and whether they would be likely to win in the courts. Should this assessment conclude that the case is weak or unwinnable then they will notify the holder of the policy that they are not prepared to cover them for legal expenses if they pursue the dispute.

If the case seems more uncertain or the insurance company believe that the policyholder has a good chance of winning then they will normally instruct one of their panel of solicitors to analyze the case in full.

The insurance companies set up these panels of solicitors based on their experience and competency and they do not work for the company. They often agree a no win no fee arrangement which means that the solicitor will only be paid if they win the case and then recover their costs from the negligent party. Sometimes they are paid on a per case basis if the dispute seems less certain.

For individuals the most common use of legal expenses cover is in cases of motoring accidents, personal injury claims, minor consumer disputes and to recover uninsured losses from other parties. It does not mean that this type of cover cannot be used in other instances and other common disputes that it can be used for are property issues and claims of medical negligence.

Legal expenses cover is not limited to individuals. Companies and those in business can purchase this cover to protect their business. It is a fact that a lot of small business owners will not defend their business and pursue a dispute even when they know they would win through fear of the legal costs that are involved in doing this. There are many insurance companies offering these kinds of policies to businesses and this normally includes cover for employment disputes and compensation, legal defence, tax protection and property protection and physical injury.

Legal Expenses Insurance - A Quick Guide

If you got into a dispute with a holiday company, a tradesman or a neighbour, and you had no choice but to pursue it through the courts, would you be able to pay your costs without difficulty? What if you were injured in an accident, or unfairly dismissed from your job?

Cover yourself properly and you'll be able to afford to take a case as far as you want until you are satisfied with the outcome. In addition, this insurance removes the financial worry from a situation which is probably already quite stressful enough.

Most legal expenses insurance, or LEI, is sold as 'before the event' cover, the 'event' being the situation which triggers the need for legal action. As the name implies, it covers things which could potentially happen. It means that solicitors, expert witness and court fees and any legal expenses awarded to the other side will all be paid for. There is generally a maximum limit on how much money can be paid out - for example, up to 100,000.

'After the event' LEI is taken out only after the event has occurred, and protects the policy holder or their business against the cost of losing their legal case. Each 'event' requires a separate policy. You can organise this cover through a solicitor or a specialist broker. Be aware that 'after the event' insurance also tends to be more expensive than other types of LEI.

More often than not, legal indemnity cover is sold as an additional feature of an existing policy, such as household insurance. It's also possible to have it as part of your car insurance, giving you additional protection against any costs arising from road traffic accidents for which you are not otherwise insured.

If you're buying legal expenses cover as an add-on to a policy you already have, you may well be pleasantly surprised at how little it increases your annual premium - fees of 15 or 20 are not uncommon. Sometimes, LEI is already included for free, so it's worth checking your household and motoring policies for this. Have a look at what exactly you are already covered for, and any conditions which may apply.

While it is perfectly possible to insure yourself against legal costs with a standalone policy, this is less common.

As with any insurance cover, you need to check the terms and conditions very clearly before committing yourself to a new policy. With some legal expenses cover, for example, the insurer sometimes reserves the right to withhold payment if it feels there isn't a reasonable chance of your winning your case.

At the same time, with 'before the event' cover you may not be able to hire a solicitor of your choosing until legal proceedings are already underway. This means you should get in touch with your solicitor before employing a lawyer and running up legal bills.