Legal Expenses Insurance: a definition
Legal expenses insurance is insurance cover you can purchase to insure against potential future legal costs. It is also possible to purchase legal expenses insurance in certain circumstances to cover costs of proceedings relating to an event that has already occurred.
What does legal expenses insurance cover?
Legal expenses insurance covers the cost of legal advice and the cost of taking action in certain situations. It allows the insured to raise or defend court proceedings in a legal action that might happen in the future.
In the case of after the event insurance, is allows the insured to raise or defend proceedings after a dispute or event has taken place.
How is legal expenses insurance purchased?
Legal expenses insurance can be purchased as a stand-alone policy or it may be included as a standard feature of another insurance policy, for example, motor or home insurance. It can also be purchased as an optional add-on to other types of insurance.
What types of legal expenses insurance are there?
There are two types of legal expenses insurance:
Before the event: this is an insurance policy that covers events that might happen in the future.
After the event: this is an insurance policy that covers legal action relating to an event that has already taken place. After the event insurance policies are usually stand-alone policies.
Who is legal expenses insurance for?
Legal expenses insurance can be beneficial for individuals, motorists, and business owners. Business owners may be more likely to face legal action than individuals, and legal expenses insurance can help them pursue legal cases without worrying about legal fees.
The Legal Services Board has developed a strategy including an aim of most households having legal expenses insurance, allowing them wider access to justice.
Until this comes into being, check your motor or household insurance or any insurance benefits that come with your bank account to discover if you already have legal expenses insurance available to you.
When might legal expenses insurance be used?
Perhaps the best way to understand how legal expenses insurance is used is by looking at a couple of examples.
Employment Disputes
An employee faces unfair dismissal from their workplace and decides to pursue legal action against their employer. With a "before the event" legal expenses insurance policy attached to their home insurance, they can cover the costs of legal advice and court representation without worrying about out-of-pocket expenses.
Property Disputes
A homeowner discovers that a neighbour has built a fence encroaching on their property. They wish to resolve the matter legally but are concerned about the costs. Their "before the event" legal expenses insurance, included in their household insurance, covers the legal fees, enabling them to address the issue effectively.
Personal Injury Claim with After the Event Insurance
A motorist is injured in a car accident caused by another driver. They did not have legal expenses insurance at the time of the incident but need to take legal action to recover damages. They purchase an "after the event" insurance policy, which covers the legal costs of pursuing their personal injury claim, ensuring they are not financially burdened if the claim is unsuccessful.
Business Contract Disputes
A small business owner discovers that a supplier has breached their contract by delivering substandard goods. With a legal expenses insurance policy tailored for businesses, they can afford to initiate legal proceedings to recover their losses.