The cost of hiring a solicitor or barrister, or anyone involved in providing legal services in the UK, can be hugely prohibitive. However, having good legal representation is crucial in disputes where you might not only have to pay out for damages, but also cover your adversary’s legal costs. Likewise, the quality of legal advice you receive is also extremely important if you’re hoping to win compensation from an individual, group of individuals or company which you have taken to court.
Help with sky high legal rate
With solicitors’ hourly rates ranging from £120 to £300 an hour (or more if you need specialist legal help) the costs can quickly mount up to very large sums. Legal expenses insurance is available to ensure that if you do get involved in legal proceedings, either as a defendant or plaintiff, you’re financially covered for the costs involved.
What is legal expenses cover?
Legal expenses insurance is often sold in conjunction with home insurance as an ‘add on’. Occasionally more expensive policies will include it as standard, but most policies won’t. Although such cover is often associated with home insurance, the legal action you might claim for doesn’t have to necessarily be related to your property or possessions. Whether you’ve been involved in an accident, feel you’ve been unfairly treated at work, have become involved in a dispute with a tradesman or neighbour, legal expenses cover provides a financial backstop for the advice you need. It could be that the dispute is with a person, persons, company, organisation or sole trader, legal expenses insurance means you should be covered for most legal eventualities.
Legal expenses claim limits
Legal expenses insurance doesn’t provide a bottomless claim pit however. Insurers are, of course, aware that legal disputes can end up costing millions of pounds in legal fees and so they cap the amount you can claim. This is usually anywhere between £50,000 and £100,000, and you would agree this when you first take the cover out with an insurer. If you feel you might need a bespoke level of cover outside of the normal claim limits of a policy, there are insurers who can arrange this for you.
Who is covered?
Under the terms of legal expenses insurance, ordinarily all members of a family residing at the address the home insurance policy is written for are covered. It won’t cover lodgers, and other paying guests, or friends staying at the address.
What does home legal expenses cover include?
There are a number of situations and disputes where you might need legal help which you will typically find covered under the terms of legal expenses insurance. These should include:
- Neighbour disputes (e.g. boundary issues)
- Personal injury claims
- Employment disputes (e.g. unfair dismissal)
- Consumer disputes
- Identity theft
- Criminal defence
- Tax investigation
- Medical negligence
- Provision of inadequate service
Is the insurer obliged to provide assistance?
Insurers will only take on a legal claim if they believe your case has a reasonable chance of success. However, they are duty bound to take reasonable steps to assess the strengths and weaknesses of your position.
Do I have to accept any settlement they recommend?
You will be expected, under the terms of the cover, to accept what is deemed to be a ‘reasonable’ settlement from the opposing side if it’s recommended by your legal team that you do, and if one is offered. However, if you disagree, and feel the settlement offer you’re recommended to take is inadequate, you can complain to the financial ombudsman.
Is any compensation I’m instructed to pay out, or attempting to win, covered?
Unfortunately, as compensation can run to millions of pounds, legal expenses cover doesn’t extend to paying this out! If you lose a case, and are ordered to make a payment, you would need to pay it yourself. Likewise, any compensation for damages that you’re claiming for won’t be paid out by your insurer in the event that a case is lost.
Are you already insured?
If you’re considering adding legal expenses cover to your insurance, you should check you’re not covered for it already. There are a good number of bank accounts and credit cards which offer legal cover as part of their terms. Or, if you’re a member of a trade union, you should be provided with legal assistance in any employment dispute (which may be the main reason you’re considering adding legal cover in the first place).
What are the benefits of legal expenses cover?
The benefits of opting for legal expenses cover include:
- No upfront solicitors fees – The insurer will pay a solicitor’s fees directly to the solicitor, so you don’t have to pay anything upfront
- Alternative to legal aid – Legal aid is difficult to get (you generally have to be in a very low income bracket), and isn’t available for employment disputes, which are responsible for a large number of claims
- 24-hour assistance – Most insurers that provide legal expenses cover offer 24-hour legal advice helplines. This can prove extremely useful if you want points of law clarified so you can approach an individual or organisation from an informed point of view, possibly even helping to prevent full legal action from being necessary.
Here are a couple of examples which serve to show just how useful legal expenses insurance can be:
1) Identity theft
If someone steals your identity, the results can be extremely damaging. A loan could be taken out in your name, which you’re unaware of, but which results in legal action being taken against you. The identity thief will most probably have disappeared with the loan money but as it’s under your name, you would potentially be seen as liable. Legal expenses cover means you would be able to cover the cost of any necessary solicitor’s fees to help fight the claim made against you. It will also cover you for the potential legal costs involved with removing any wrongly entered criminal judgements, and erasing any negative affect the situation may have had on your credit rating.
2) Probate dispute
It’s fairly common that when an immediate relative dies for a dispute to occur over probate for the deceased’s estate. Such disputes nearly always arise after disagreement over who gets what. Having legal expenses cover as part of your home insurance means that you would be able to fight for probate rights, and not potentially lose out on what you consider to be rightfully yours, at little or no financial cost to yourself.
Things to watch out for
There are a number of policy elements included in most legal expenses cover which you should be aware of before taking it out. These include:
What isn’t covered:
- Defamation proceedings.
- Disputes of a matrimonial nature (e.g. divorce proceedings).
- Pre-existing disputes. – Compensation (either claimed for or ordered to pay out).
- Where state funding is more widely available, such as for child care proceedings and criminal trials.
- Cases where there is ‘no reasonable prospects of success’ (e.g. due to a lack of evidence and/or legal obstacles).
- Where the cost of proceedings is likely to be disproportionate to the potential amount ‘won’ in court.
- When there’s been a considerable delay between an issue arising and the start of the legal expenses claim.
Things to consider:
- Limit of individual claims – Most legal expenses cover allows for maximum individual claims of anywhere between £50,000 and £100,000.
- Aggregate limit of claims – If, for example, you make a number of claims within the policy period, you will not be covered if costs rise beyond the total claim limit (this figure is often between £500,000 and £1million).
- Is it winnable? – If you can’t demonstrate you’re likely to ‘win’ your claim, the solicitors don’t have to take your case
- If the dispute first occurred before you took out the policy – Generally, most policies won’t cover you if the dispute that you’re claiming legal expenses for began before the first day the policy takes effect.
- Make sure you understand exclusions – Always read the small print. Exclusions can differ considerably between insurers, so make sure you’re happy with them before agreeing to the cover.
Do I need legal expenses cover on my home insurance if I have motor legal cover?
If you have legal expenses cover for your motoring needs, it’s unlikely to include the same areas as legal expenses cover would which formed part of a home insurance policy.
- Motor legal expenses insurance is more specific, and will cover parking and speeding offenses, as well as legal advice involving criminal motor convictions.
- Home legal expenses cover is more general, covering tax and employment disputes as well as personal and third party injury claims and neighbour disputes.