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What Does Legal Expenses Insurance Mean and How Would I Go About It?

Legal expenses insurance is a form of insurance that is designed to cover legal expenses – rather obviously! It’s common as an added extra on your motor policy and sometimes with home insurance or bank accounts. As it’s significantly more common with motor policies, I’ll stick to that as its most applicable.

If you have an accident that was not your fault, your motor insurers will likely advise you that you have the benefit of Legal Expenses Insurance (LEI for short) and that this allows you to have a solicitor and make a claim nice and easy. It is true, that it is an insurance policy, and your insurers can sue it with a solicitor; but there’s a hidden motive as to why your insurers want you to use it. In fact, you’ll likely find that they will be rather pushy to make you use it.

How to Go About It

What you should do is avoid it at all costs! Avoid taking it out, avoid having anything to do with it, and certainly avoid using it. Why? That hidden motive I mentioned above is about to be revealed. In fact, the prime use of LEI and how it related to claiming is being made ILLEGAL next April 2013! So you’d best read on!

What your insurers will do is use the LEI policy as a cover to hire a solicitor for your case. Nothing wrong with that on the face value of it; but what they won’t tell you is that they are getting PAID for hiring you’re lawyer. In fact, it’s the lawyer you will be allocated from their panel that will be paying your insurers a referral fee or administration fee to allow them to take the case. Essentially, the solicitor is buying the rights of your claim from your insurers.

They have panels and panels of them; so how do they choose which one gets your claim? Simple – the one that pays the most. In essence, it could be the highest bidding law firm that gets your case.

But what does this mean to you? So what if your solicitor has paid a huge fee to your insurers to have the rights of making your claim; how does this affect you.

It actually affects you quite a lot…

Your Claim Budget is CUT!

In road accidents, lawyers can only recover a fixed amount of legal fees in the region of, commonly, £1,500.00. This fee is recovered from the losing side of the claim – so the insurers of the Defendant. Now, referral fees that solicitors pay to your insurers aren’t included as a recoverable fee. So when your solicitor has paid £1,000.00 to your insurers to have the rights of your claim, that’s £1,000.00 of the £1,500.00 budget the law firm has for the case based on recoverable fees GONE!

When you look at it in a simple way as this: your solicitors have used two thirds of your claim budget on paying your own insurers for the claim! That leaves them with a budget of potentially just £500.00 to spend on your case! Because if they spend more, they won’t be making any money!

So if your solicitor has less money to spend on your case – e.g. £500.00 which equates to 2 hours of work for a Grade A solicitor, how on earth can they afford to:

  • Fight tooth and nail for the maximum payout for you
  • Update you regularly and chase the other side to progress the case
  • Arrange for medical treatment, hire and repair needs
  • Look at all avenues of maximising your claim, like full losses – earnings, medical fees, care and assistance

The answer is they can’t. That’s just simple mathematics. It’s no complicated formula or equation – work it out:

  • Claim Budget = £1,500.00
  • Referral Fee = £1,000.00
  • Claim Budget – Referral Fee (£1,500.00 – £1,000.00) = £500.00
  • Therefore remaining claim budget is just £500.00!!!!!

You may even end up getting stung yourself with some hidden fee or cost. Or the solicitor may well just come back to you and charge you if they don’t make a profit. It’s a known fact that most Law Society approved No Win, No Fee agreements states that your solicitor only has to SEEK to recover the legal fee back from the other side. If your solicitor pays £1,000.00 for the claim which means their fees end up being £2,500.00, but they can ONLY recover £1,500.00, who is going to pay the remaining £1,000.00.

Well, under the terms of the agreement, they could seek to recover it, fail, and then come back to you. They’ve done their job – they’ve sought it, failed to recover it, and now must charge you for it.

The thing is, there is nothing wrong with the agreement being worded that way; it’s just that the referral fee leaves you potentially owing thousands of pounds in legal fees!

Why to AVOID Legal Expenses Insurance

Well other than the above, by getting an independent lawyer that is not involved in referral fees like us, you have a lawyer who will be spending the full £1,500.00 claim budget on YOU! That’s making sure that:

  • Your claim is maximised by spending more money on fighting with the other side, researching the offers, getting the best medical evidence so you get the highest possible payout!
  • Update you every 14 days so the case is being worked on very regularly and you are always in the loop as to what’s going on with your claim.
  • Arrange the best private medical care to help you with your injuries.
  • Fully investigate and collate all potential losses and extras you can add on to your claim, like lost earnings, medical expenses, travel expenses, and care and assistance from family and friends that we can include an hourly rate on for – even though you’re likely not paying them!

To speak to a law firm that actually wants you to be their client because we want you to have the best and easiest claims experience, rather than a law firm that pays your insurers for your business and potentially provides you with a rubbish service, contact our free claims helpline today on 0800 634 7575 – today!

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