Do I have legal expense insurance to fund my legal fees?
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Legal expense Insurance to pay your legal fees

Paying your legal fees

Relevant across multiple law types

Due to cuts by various Governments, Legal Aid is now no longer as widely available as it used to be. There are large areas of law which simply do not qualify for Legal Aid at all, such as business disputes, most money disputes, and conveyancing.

In addition, even if legal aid is still available for certain types of law there are often stringent eligibility criteria that mean even people with modest incomes or assets may not qualify.

This can leave people struggling to pay for legal fees. But there is another option which many people may not be aware that they have. This is Legal Expenses insurance which is often attached to home insurance policies or motor insurance policies. Sometimes it also comes as a benefit with certain membership or professional organisations.

So, if you are trying to work out how to fund your legal fees and you have any form of insurance such as house or car, or you are a member of an organisation, look carefully at the policies or membership documents to see if you have got Legal expenses insurance which could help.

Not all policies have legal expenses insurance attached. Often you must pay a few pounds extra each year to have it on – so it’s always worth considering making that payment when you come to renew your policies.

It’s also worth being aware of some common restrictions on policies.

Firstly, not all policies cover all legal disputes. It’s rare to have family or divorce law covered, often because policies are bought jointly, and insurers don’t want to fund one policyholder making claims against another. Also, divorce is often not a sudden event and insurers don’t want to insure someone for divorce fees when they may have known that they are likely to get divorced when they bought the policy.

The legal fees insured are often related to the type of policy. So, a motor or car insurance policy may cover things like accidents in the car or disputes about the car. It usually will not cover unrelated matters such as an employment dispute.

However, household insurance, buildings and contents, with legal expenses attached, tends to cover a wider variety of legal issues. Consumer disputes, employment matters, accidents and property disputes are often covered. You need to look carefully at the terms of the policy to see if your matter is covered or not.

For business owners with business disputes, it’s also worth looking at your business policies or talking to you your broker about them, because Legal expenses insurance can be attached to business policies too and cover business disputes.

Other things to be aware of are a time limit for reporting claims and sometimes a time limit in relation to when the incident occurred. Many insurers will have a fairly strict time limit on reporting a claim so they will not cover it if you are too late in reporting. That means don’t delay in reporting a claim. Your policy will usually say how to report a claim and what you need to do.

There are also provisions in some policies that mean you cannot claim for something that may have started or occurred before the policy was incepted or within a certain time of the policy being incepted. The reason is that insurers don’t want people buying a policy knowing at the time they purchase that they are likely to make a claim.

If the insurers do agree to cover your legal fees, they will usually ask you to use one of their panel solicitors or will agree fees with your own solicitors. They will not necessarily agree upfront to pay your own solicitors fees, and the insurers will not pay legal fees before they have agreed to cover your claim. That means that you should not start incurring fees with your own solicitor, expecting the insurers to pay, before the insurers agree to do so. If you want the insurers to pay your legal fees the safest approach is to get them to agree to do so before you incur those fees. Be clear with yourself, your solicitor and the insurers on whether they will pay your solicitor, or whether they want you to use one of their panel solicitors.

You also need to be aware of the limit of indemnity. Insurers may agree to pay your legal fees but there will be a limit on it. Your policy will tell you what that is. Typically, that is £50,000 or £100,000 but some will be as low as £25,000. Although those sound like a lot, in some legal disputes it can be easy to reach these fees.

The limit of indemnity will often include other side’s fees as well. So, if you have a limit of indemnity of say £50,000 you may run out if your own fees reach £25,000 and the other side’s fees reach £25,000 too. It’s important therefore, if you use Legal expense insurance to fund your case, that you discuss with the solicitors whether the limit of indemnity is likely to be enough and what happens if it runs out. It may be that at that point your solicitors would offer you a “no win no fee” agreement. But they do not have to, so in a large case it’s worth discussing that with them well before any indemnity limit is reached.