If relevant, then legal insurance policies can be effective and represent excellent value for money. For a modest sum of, say, £30 consumers can buy a before the event (BTE) insurance policy with as much as £100,000 of insurance cover.
Legal expenses insurance provides you with protection against the costs of bringing or defending legal action. Most policies are sold in connection with other existing policies or given away as add-ons to motor policies or home insurance policies. At present they cannot be bought as stand-alone policies where for example policyholders might pay an annual premium – unlike Germany where it is reckoned that 46% of the country is covered by such policies.
In the UK, according to the Ministry of Justice in 2007, six out of 10 of us had cover – it is either given away with motor or household insurance policies or sold as a cheap add-on (at about £20 to £30). On the face of it, it’s great value for money because policies typically provide for £50,000 or £100,000 cover for disputes including compensation claims for injuries at work, actions against an employer or even arguments with tradesmen over botched jobs. However there’s a catch. People tend either not to know they have the cover or, if they do, not to know what it is for. The reason why it is so cheap or free is because we don’t use it.
In the UK there has been much talk of the government promoting LEI. A 2008 Ministry of Justice paper (The Market for BTE Legal Expenses Insurance) called on the UK industry, consumer groups and the likes of the Association of British Insurers and Financial Services Authority, to ‘take the lead on ways of promoting LEI’ as well as to encourage suppliers ‘to increase the chances of policyholders reading the documentation’.
Under a good scheme you should have access to a lawyer who will establish whether you have a legal claim or not. Insurance cover will remove most (if not all) of the financial risk of pursuing rights and has a deterrent effect–people know that you have it, they know you were able to defend yourself and so are less likely to pursue do you through the courts.
It does have significant limitations. You might not be able to choose your lawyer. Check the general exclusions in the policy document. Policies are very limited and so will not cover, for example, legal proceedings between family members (such as matrimonial disputes), libel actions or business problems if you work from home. They will only cover you fit disputes that have reasonable prospects of winning and that decision will be the insurers. Also, there is usually a time lag built into the policy before it comes into effect and so for example that period could be as long as 6 months in the case of a dispute with neighbours.
