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.