What is legal cover, legal protection or legal expenses insurance?
Legal cover or legal protection are properly called legal expenses insurance. This cover is sold alongside other policies, particularly vehicle insurance, and often over-sold.
So what does legal expenses do?
If you have to bring an action for compensation after an accident the legal expenses insurance will cover your risk of paying legal costs. That is it. Legal expenses insurance does not insure your excess or uninsured losses, it simply covers your risk of paying costs if you have to bring an action to recover compensation for injury, damage to your vehicle, loss of earnings and expenses. This insurance is sold as if you will be naked on the road without it.
Legal expenses insurance can be useful, but there are alternatives and YourKey arranges the insurance, but only once an accident has occurred and when the insurance is necessary. That is how YourKey saves you money.
If you are to blame for an accident legal expenses insurance is irrelevant as your own third party cover kicks in to pay for the damage you caused. Your own vehicle may be insured if you have comprehensive insurance but this is quite different from legal expenses insurance.
Legal expenses insurance will not help you defend a criminal prosecution, it will only help you pursue a compensation case. The legal expenses insurer only has to get its cheque book out if your case fails, as if you win your legal costs are paid by the insurer of the driver to blame.
The odd thing about legal expenses insurance is that the insurer will only support your compensation case if it is judged to have a reasonable prospect of success and the legal costs can be paid by the other side. The insurer has to be kept informed and can pull out if it judges your prospects of success have changed or a good offer has been made by the other side. The best description is buying legal expenses insurance would be like buying insurance on a car but having to pull over and ask the insurer for permission to continue with your journey if it starts to rain.
Much of the cost of legal expenses insurance is sales commission which explains why your broker or insurer works so hard to sell you the policy. They also make the sale at the end of the insurance buying process because your resistance is low and you do not want to say no and start again.
What might surprise you is the business model of most legal expenses insurance companies in this country is not based on premium income, it is based on the receipt of income from compensation cases. Referral fees charged to solicitors for compensation cases have been banned in 2013. Before the ban legal expenses insurers sold compensation cases to solicitors. They now use other financial arrangements, and some legal expenses insurers have entered into business with solicitors so they can continue to make money from compensation actions. No complaint is made about these practises as they are perfectly legitimate. What is not fair is exaggerating the protection offered by these policies, receiving high sales commission, and the lack of transparency on the part of the legal expenses insurer. It is you, not your vehicle, which might need legal expenses insurance, so why sell you a policy with each vehicle you insure.
YourKey used to offer a free policy of legal expenses insurance as that seemed the best way to get our message home at the time. We now do the same thing by arranging insurance after an accident if you need it. This allows us to help with all types of accidents and a wider group of people – same protection and more flexibility.