Everything You Need to Know about Legal Insurance

Legal insurance, also known as legal expense insurance, serves precisely as its name suggests. It offers coverage for your expenses in various legal situations. Policyholders typically gain access to legal advice and guidance from professionals in the field, along with financial coverage for the costs associated with legal actions. This type of insurance can encompass legal expenses initiated by either party involved. Whether you need to file a lawsuit or defend against one, legal insurance can provide assistance in navigating the legal process and alleviating financial burdens.

It might surprise you, but legal insurance has a history dating back to the Napoleonic Wars in Europe during the early 1800s. Its modern iterations can be traced back to England during World War I. However, legal insurance gained significant traction in North America only in the early 1990s. Increased awareness among insurance brokers, business proprietors, and individual consumers has spurred its growth over the past 25 years. Presently, approximately 14% of individuals in the United States hold some form of legal expense insurance, with business owners being the most frequent beneficiaries.

Legal insurance generally falls into two primary categories: “Before-the-Event” and “After-the-Event.” Before-the-Event insurance is commonly sought by small and medium-sized companies lacking in-house legal counsel. However, individuals can also acquire this type of insurance. These policies are designed to provide coverage for unforeseen and unexpected legal events that may affect a person or business in the future.

Before-the-Event insurance provides coverage for business owners facing a range of legal challenges. This coverage typically extends to disputes with employees, tax inquiries (including audits), criminal defense expenses, property protection, and legal proceedings resulting from health and safety inspections. Legal fees can vary widely depending on factors such as specialization, experience, location, and the size of the law firm, ranging from a few hundred dollars to $500 or more per hour. Legal expense insurance helps mitigate these costs for individuals and businesses, offering immediate access to professional legal advice when needed.

After-the-Event insurance safeguards policyholders once a claim has been initiated. It may cover disbursements made by the insured person’s lawyer while pursuing legal action, as well as adverse costs that the court may require the policyholder to pay. Law firms frequently offer After-the-Event insurance to their clients to minimize the risk of incurring costs to the opposing party in the event of an unfavorable court outcome.

Legal insurance is obtainable through licensed brokers or law firms in both the United States and Canada. Most policies grant access to a comprehensive legal document center, a 24-hour telephone helpline, and various other legal services. Coverage typically ranges from $100,000 to $1,000,000.

Additional insurance riders can be appended to policies to address specific legal issues that may arise, such as those pertaining to company-owned vehicles used by employees. When selecting an insurance provider, it’s crucial to compare policy features. Ensure that the policy offers 100% paid-in-full coverage and consider whether it includes in-person legal consultations rather than solely phone-based advice. Verify that the attorneys provided are properly credentialed and thoroughly research which legal issues are covered (and excluded) by the policy. Over-the-phone legal advice is generally a standard feature of most policies.

This particular type of insurance can offer valuable assistance, although it may not be essential for everyone. Typically, it proves most beneficial for small and medium-sized business owners lacking their own in-house legal counsel. Legal insurance grants policyholders access to professional legal advice and financial coverage for potential costs, regardless of whether they initiate legal action or become defendants in a lawsuit.

While legal insurance may provide peace of mind to certain individual consumers, it may not be a necessary expense for everyone. Unless you currently face a legal issue or anticipate future litigation, you might find it unnecessary. However, it’s important to note that professional legal assistance can be costly. Therefore, if you wish to safeguard against potential future costs, consider consulting a licensed insurance broker for further information. Alternatively, reach out to local law firms to inquire about coverage options they may offer independently. Assess the advantages and disadvantages of your specific circumstances to determine whether legal insurance is likely to be beneficial for you.