A Look at Legal Expenses Insurance

Legal expenses insurance can cover your costs if you are sued by another party for any reason. Legal expense insurance is typically retained by large corporations, but wealthy individuals who may find themselves facing a large lawsuit can purchase private lines of legal expense insurance. This type of insurance is particularly popular with individuals who are exposed to unique risks due to their profession. For example, accountants and financial advisors may need personal protection from disgruntled clients in the even they are personally sued and their business liability insurance does not cover the claim. Legal expenses insurance can be purchased before, or after, the event occurs.

Benefits of Legal Expenses Insurance

Even if you "win" a lawsuit, the expenses you incur can be extremely large. This is the reason so many corporations and wealthy individuals are willing to settle a case. Paying out legal expenses can bankrupt a small businesses. When you purchase legal expenses insurance, the expense of a lawsuit is spread out over the life of your business with regular premiums. When a claim is filed, you do not have the large, one-time expense at the heart of so many business failures. 

Before the Event Insurance

Many business owners know they are exposed to a high degree of liabilities through their line of work. For these companies or individuals, the wisest method may be to purchase before the event (BTE) insurance. This type of coverage is similar to any other insurance policy. An underwriter evaluates the various risks the client is exposed to then recommends a specific policy at a specific price. The client pays this price on an ongoing basis, and the client is covered if a claim occurs. 

After the Event Insurance

Other businesses may not see large exposures to law suit. For these businesses or individuals, it may be worthwhile to simply wait until a lawsuit occurs. At that time, the individual can purchase after the event (ATE) insurance. This is more expensive in the short-term, and it requires high payments while the lawsuit is going on. However, if the insured wins the lawsuit, the entire premium can be recovered. The premium can even be deferred until after the lawsuit concludes in some cases.

Purchasing Legal Expenses Insurance 

If you decide you need legal expenses insurance, start by contacting your existing liability insurance company. First, look at those expenses which would be covered if there were a lawsuit against you. Then, determine where they may be gaps in your coverage that may require an additional legal expense line. You have the option of purchasing directly with most insurance companies. If you would like to pursue ATE insurance, your options may be slightly more limited. Ask for help from your professional liability insurer  to help you with your policy. You may even consider speaking to a broker with expertise in corporate governance, or professional liability to be sure you get the insurance that is just right for your needs.