Why buy legal expenses insurance?

Taking legal action ought to be the last resort in business matters. However, if you feel that the legal route is the only one left open to you, then the costs of a solicitor can be very high. Rather than underwrite your solicitor’s fees yourself, freelancers can take out legal insurance. In fact, there are legal expenses insurance policies around specifically designed for small business practitioners.

As a freelancer, you may never need to undertake legal proceedings in your entire career. However, legal disputes do arise from time-to-time if you don’t get paid or face increased costs from a sub-contractor, for example. Legal expenses insurance come into their own if you are sued by a client. An insurance policy can also come in handy if you need to take action against another party and would otherwise be put off so doing due to the legal expenses you’d face. Remember that many freelancers don’t have legal expenses insurance and are perfectly happy to cover the potential costs of a dispute, should one arise. That said, legal insurance can be of great benefit.

In short, any small business owner who needs to make a claim would benefit from having taken out adequate insurance. Legal protection insurance may be required if you have any sort of public indemnity that you need to take out in order to freelance in certain professions. Specialist insurance policies may be a requirement, for example, to practise as a freelance:

  • Architect.
  • Engineer.
  • Healthcare professional.
  • Counsellor.
  • Legal professional.
  • Accountant of auditor.
  • Management or IT consultant.

Basically, such policies are offered by insurers to offer legal protection if something you do on the job goes wrong. Under such legal cover, legal action arising years after you provided a service would be provided so that your client would receive adequate compensation from your insurer even if you had retired or ceased trading. With professional indemnity insurance, legal protection insurance is normally built in.

That said, legal expenses insurance is slightly different. It can be of benefit to any freelancer, whether or not their profession requires them to take out professional indemnity insurance. Unlike people who have a contract of employment, freelancers may be personally sued if some dispute or other arises in the course of their work. Making a claim means that legal expenses a solicitor might run up while acting on your behalf would be covered. Legal costs can soon get very high, especially when appeals are made, so ensuring you don’t incur them all will offer great peace of mind. Freelancers who can benefit from legal expenses insurance include:

  • Hairdressers.
  • Beauty therapists.
  • Writers and journalists.
  • Complementary therapists.
  • Delivery drivers.
  • Tutors.
  • Personal assistants.
  • Public relations professionals.

You can pay as little as around £30 a year to be able to make a claim for legal expenses. The more you pay, then the more add-on services you will get from the insurer, such as personal injury cover, too. Some cheaper legal protection insurance won’t cover all the day-to-day expenses of your own solicitor. However, being insured at all helps to reduce your liability in the event that a claim is made against you. Some policies will be more expensive, especially if your freelance business has its own property or employs staff who will have certain legal rights.

In most cases, you will get access to a legal advice helpline as a bare minimum. Just like a home insurance policy, such legal helplines may only put you through to someone with paralegal training who can offer basic advice. Unlike home insurance, however, your legal advice can be upgraded if the legal advice you need means the insurer will need to find a solicitor for you.

Only after you have discussed the potential legal matters that may arise from making a claim against your legal expenses insurance will you proceed. This can be helpful if you simply want a legal eye to overlook a property contract, for example, rather than to take the more serious step of taking somebody to court over a dispute. In most cases, legal expenses insurance will cover your legal fees that result from a court hearing but it won’t cover you for fines that might be issued if you have found to be negligent in some way, for example.

Some motoring policies provide cover for personal injury behind the wheel. The insurer in question may also provide a degree of cover for legal expenses if you have an incident on the road while working. In order to benefit from the sort of legal services that some car insurance policies provide, you must inform your insurance company that your car or van is used for work as well as for personal motoring. If not, then the cost of legal matters that arise may not be fully covered.

All information presented here is based on experience and to the best of our knowledge. Please note that we cannot assume liability for the accuracy, topicality and completeness of the information provided. In particular, this content does not replace any legal or tax advice in individual cases. For advice on legal or tax matters, please contact your trusted lawyer or tax advisor.

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