What does legal expenses insurance mean to you?
Consumer Focus set out to see what legal expenses insurance means to you.
Legal expenses insurance, sometimes called before the event insurance, is sold very effectively, but not explained well in my opinion. Most people are sold this insurance when they insure vehicles, and you often see it included in other insurance sales, household insurance being a good example. Look for it in your next policy renewal, as you usually have to deselect it if you do not want to buy. We will explain how legal expenses insurance works.
In a press release on 18 April 2011 Consumer Focus told us of a survey of 1,001 people. In a nutshell people often did not know they had legal expenses insurance they had paid for or been given as a benefit of a bank account or other transaction. “Around six in 10 consumers already pay for this insurance in some form and the UK legal expenses insurance market is worth some £447 million.”
Legal expenses insurance is in the news now as legal aid is being restricted even further, and Ministry of Justice reforms are being aimed at litigation, and personal injury litigation in particular.
Legal expenses insurance is designed to pay your legal bill if you pursue or defend a legal action supported by the policy. At the outset the insurer must be satisfied your case has a reasonable chance of success. If along the way the chances of success reduce the insurer can pull out.
Legal expenses insurance policies are usually limited. Policies bought when buying vehicle insurance usually only cover you when using that vehicle. Policies sold with household insurance policies often give broader cover, but will still have a long list of exclusions.
What all policies have in common is the aim to cover cases where it is possible to recover legal costs from your opponent if your case succeeds. So the policy is not there to pay up if you have a legal action. The policy is there in case a legal action goes wrong. That is good news, but you are often sold unnecessary and expensive policies which duplicate cover you already have.
The aim of the legal expenses insurer is to sell its policies and only support cases which are likely to win. That makes perfect sense, but the legal expenses insurers do not tell you about are the referral fees they receive from the solicitors to whom the insurer refers your case. That is why an insurer will have a panel of solicitors with whom it has a financial deal. So when Consumer Focus demand the consumer should be free to choose their solicitor they fail to understand the business model. You should be told about the financial deals which sit behind your policy, but without them legal expenses insurance would be much more expensive.
Consumer Focus identified how many people had this cover, but concluded this will not help those affected by legal aid changes. That is because those people are not buying insurance policies with add-ons like legal expenses insurance, and they do not have the money to qualify for expensive bank accounts with bundled extras.
Legal expenses can be very useful, but do not buy it unnecessarily, and check what is really covered. You may not have noticed legal expenses insurance for accidents is available free from Your Key.
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