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Ask an expert: ‘Do I need legal expenses insurance?’

Does legal expenses insurance really save you money?

Each week, the Which Money? experts answer your financial queries. You can submit your questions to money-letters@which.co.uk or via our Facebook or Twitter pages.

Q: My husband and I both have separate car insurance policies with the same provider. We have both added legal expenses insurance to our policies which adds an extra £25 to our premiums. We are the named driver on each other’s policy, so do we actually need to pay for two sets of legal expenses insurance? Or could we just add it to one policy to cover both cars?

Submitted via: money-letters@which.co.uk

Legal expenses cover is a common add-on to car and home insurance policies, and some insurers offer it as standard.

Which? looks at how legal expenses insurance works and whether it’s worth adding to your policy.


What is legal expenses insurance?

Legal expenses insurance is designed to protect you against the potential cost of legal action that may be brought by you, or against you by another person.

For car insurance, legal expenses insurance is usually sold on a ‘per car’ basis – meaning that you will only be able to make a claim for incidents affecting the car specified on your policy.

Even if you have a multi-car policy, you will need to add legal expenses protection to each car that you would like to cover.

What does legal expenses insurance cover?

Often sold as an add-on to car insurance and home insurance policies, legal expenses insurance covers costs brought about by bringing or defending a court case.

The insurance doesn’t cover actual damages or compensation awarded, but the cost of going to court, including legal and court fees.

For car insurance, legal expenses insurance could cover you for the cost of making a claim for:

  • Medical expenses
  • Loss of earnings
  • Compensation
  • Uninsured losses.

Adding legal expenses to a home insurance policy could cover you for costs on cases related to:

  • Personal injury
  • Employment disputes
  • Faulty goods
  • Enquiries into your tax affairs.

This means it may be worthwhile adding the cover to both car and home policies, as each one will cover different types of court action.

For both car insurance and home insurance policies, legal expenses insurance can add around £20-£25 to your premium.

Do you need legal expenses insurance?

While legal expenses insurance is not compulsory, it could save you a lot of money if you are ever involved in a legal dispute.

For car insurance, for example, the policy could allow you to take the other driver to court to recover your costs after a car accident where you were not at fault.

Some insurance providers also give you access to a free legal helpline which could be a valuable source of advice.

Most legal expenses insurance policies have a claims limit of £50,000 to £100,000, which may not fully fund the cost of particularly complex or drawn-out cases.

Before taking out legal expenses insurance, it’s always worth checking what it covers to avoid overlap with existing policies. For example, if both your home insurance policy and life insurance policy insure the costs of personal injury claims.

Will my claim for legal expenses be accepted?

One of the main pitfalls of legal expenses insurance is that there is no guarantee that your claim will be accepted by the insurer.

The insurer’s decision to allow your claim will be affected by whether it’s clear who was at fault and your likelihood of winning the case.

Claims for legal expenses can also be rejected if too much time has passed since the incident in question, which is usually around 180 days.

If your insurer doesn’t believe the amount being contested is worth the legal fees, your claim may not be accepted. For example, if the amount being disputed is £300 but your insurer expects the case to cost £1,000, it may not be worth going to court.

If you are considering legal expenses insurance, it’s also important to check the terms of your policy to see whether claiming legal expenses will have an impact on your no-claims bonus.

Are there alternatives to legal expenses insurance?

There are some alternatives to legal expenses insurance which offer similar protection.

These include:

After-the-event insurance

After-the-event insurance covers a specific claim and is taken out once you’re involved in a specific legal dispute. It usually operates on a no-win, no-fee basis. While it can be more expensive than legal expenses insurance, you will only have to take it out when you need it.

Legal aid

Legal aid provides advice and legal representation for some civil cases. But it doesn’t cover personal injury and your financial circumstances may affect whether or not you are able to claim it.

Savings

Saving money specifically for legal disputes could be an alternative. But many people may never get court claims can often run into the tens of thousands of pounds, so it’s important to find savings option that gives you good returns.

Trade unions

If you are a member of a trade union, you may be able to get legal assistance for a variety of claims, including employment issues and personal injury.

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