What is legal expenses insurance?

Legal expenses insurance is normally an optional extra insurance which you can decide to add on to your basic homeowners insurance policy.  Some basic homeowners insurance policies now have legal expenses insurance cover automatically added to them, however not all policies do, so you must double check this.

Legal expenses insurance was first started over 30 years ago to meet consumer demands as there was a gap in this particular sector.  Legal expenses insurance is normally attached to basic homeowners insurance, because it is easier for the legal expenses provider to sell the product as the market is predominately for homeowners.  The legal expenses provider will split the premium with the homeowners insurance provider.

What is covered under a legal expenses policy?

Your basic homeowners insurance policy will contain a separate section within the policy to cover legal expenses insurance.  This section may contain different definitions to those in your basic homeowners insurance policy.

Although the wording for every basic homeowners insurance legal expenses policy will be different, there are certain areas which are normally covered within most legal expenses policies.  For example, there is normally a section to cover personal injury claims or claims arising from death.  Also, there may be a section of cover to help you if you have a legal claim arising from something that has happened during your employment.  Another section of cover could be to help you if you are facing a breach of contract situation. (Examples include faulty goods purchased or poor workmanship that has been carried out.)  There is also likely to be a section of cover to assist with legal claims arising from your property.  In addition the policy may cover you to defend legal proceedings in certain situations.

Exclusions within a legal expenses policy

The main thing you will need to check in the legal expenses section of your basic homeowners insurance policy is the exclusions.  Although you may well have a valid legal claim, your legal expenses policy may not be able to assist you.  You will find that most basic homeowners insurance policies will have specific time limits in which you will have to report a potential claim to the insurer.  Sometimes this could be a very short time frame but on the other hand the period could be much longer.  It varies depending on the type of legal claim.  One of the normal reporting periods is to notify the insurer within 180 days from the event giving rise to the claim.  However policies differ and for example, travel polices have much shorter reporting periods i.e. within 14 days.  It is always worth double checking your policy wording to ensure you are familiar with the conditions of your policy.

Another exclusion to look out for is one which relates to claims arising before you take your basic homeowners insurance policy out.  Normally a policy will only provide legal expenses cover for claims which happen or arise during the insurance period.  This may mean, in some situations, you may not be able to use your legal expenses insurance.  It is always worth checking with your insurer in any event.

You will find that there are exclusions within any legal expenses policy.  Here is a list of examples of some common exclusions:

•    Claims relating to divorce, children matters etc
•    Libel or defamation claims
•    Claims involving a driver of a motor vehicle
•    Matters connected with a money making activity
•    Claims relating to building, extending, converting all or parts of buildings and structural alterations
•    Claims relating to letting or sub-letting
•    Claims involving local authorities

The above list is not exhaustive and you should check your basic homeowners insurance policy wording to see which exclusions apply to your particular policy.