Legal expenses insurance gives you free legal advice and the use of a lawyer in case of a dispute about employment or other civil matters. It can cost upwards of £15 a year and is often sold alongside car or home insurance, although you may also get it with a paid-for bank account. What are the pros and cons?
What does legal expenses insurance cover?
Legal expenses insurance can only cover civil disputes (not criminal proceedings) but – even then – cannot deal with all types of cases.
SAVVY TIP: Although legal expenses insurance doesn’t cover all types of claim you can get advice about all types of dispute. This will cover telephone conversations – although generally not legal advice.
There are two types of legal expenses insurance:
- Household cover legal expenses insurance. Legal expenses insurance arranged through a household policy typically covers £50,000 to £100,000 of legal costs.
- Car cover legal expenses insurance. Legal expenses insurance arranged through a car policy typically covers up to £100,000 of legal costs.
SAVVY TIP: Car insurance legal expenses cover is only designed to pay the cost of a claim arising as a result of a car accident. In some cases the cover may duplicate insurance already provided by a comprehensive policy.
Household legal expenses insurance may cover:
1. Death or personal injury
2. Contract disputes arising out of the sale, purchase or hire of goods or services (including holidays).
SAVVY TIP: Many insurers don’t cover disputes with builders, however some do, although generally up to a lower limit of £25,000. Others only cover building contracts worth less or more than a certain amount (often £5,000).
3. Property disputes such as boundary disputes, noisy neighbours, sale of property and tenancy disputes.
SAVVY TIP: Some insurers excluded claims relating to a property being sold or purchased or landlord/tenant disputes, whereas others didn’t.
4. Employment disputes and related tribunal proceedings
SAVVY TIP: Some insurers impose a lower limit of £25,000 on employment claims, while others exclude claims relating to redundancy or personal injury.
What are the problems?
Although legal expenses insurance can be useful – and can be a life saver in some situations, there are problems.
- It is difficult for consumers to compare products and shop around for the best deal because legal expenses insurance is usually bought as an add-on to motor or home insurance. Different insurers cover different types of dispute with varying claim levels and coverage, and key information is often buried in the small print.
- Customer dissatisfaction. Some people find their claim for legal expenses takes a long time to be sorted out while others find it’s rejected with no reason.
- Awareness of what it covers is not widespread. Many people don’t know what legal expenses insurance is or that their insurer may offer it.
- Policies will not deal with some disputes, for example divorce. Mental health issues are also not likely to be covered.
- Consumers are not able to choose their own solicitor in the early stages. The solicitor provided by the insurer often decides on whether or not the case can be covered by legal expenses insurance and/or whether it has a realistic chance of succeeding. Cases will only be covered by legal expenses insurance if they have at least a 50% chance of succeeding.
SAVVY TIP: Some people say that this raises a question mark over whether or not the solicitor is impartial. But legal expenses insurers say that solicitors are regulated by the Solicitors’ Regulation Authority and have a duty to be impartial.
- Consumers are able to choose their own solicitor once proceedings start. It’s important to realise that once you have started legal proceedings you do have the right to appoint your own solicitor.
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