Legal Expenses Insurance (Rechtsschutzversicherung)
Legal expenses insurance covers the costs of pursuing or defending legal claims on behalf of the insured, in particular attorney, court, and expert witness fees, within the agreed scope of legal protection.
Comparison profile
- Trigger
- Loss occurring (reinsurance)
- Insured interest
- The insured's own costs of pursuing or defending legal interests in the agreed legal protection areas, regardless of the outcome of the underlying dispute.
- Rating basis
- Number of insured persons/vehicles/properties, Modules and legal protection areas selected, Claims history, Jurisdiction/court-cost regime
- Typical limits
- Sum insured per case, commonly a low to mid five- or six-figure amount, subject to an overall annual policy limit.
- Typical deductibles
- Many private-lines tariffs are deductible-free; commercial legal protection frequently applies a modest per-case deductible.
- Target segments
- Private individuals, SME, Corporates (commercial legal protection)
Insured events
- Motor-related legal disputes
- Residential and property disputes
- Contract and damages disputes
- Employment disputes (via the employment legal protection module)
- Criminal defence in traffic and minor offences
Key exclusions
- Disputes existing or foreseeable before the waiting period expires
- Building/property development and planning-law disputes above defined thresholds
- Intentional criminal acts by the insured
- Disputes among the policyholder's own family members (private lines)
- Insufficient prospects of success (subject to arbitration procedure)
Concept
Legal expenses insurance covers, on behalf of the insured, the costs incurred in connection with pursuing legal interests, in particular attorney fees, court and bailiff costs, costs of expert witnesses and witnesses, and, where applicable, the opposing party’s costs if the insured is obligated to reimburse them. The specific scope depends on the legal protection areas agreed in the policy.
Typical Areas of Legal Protection
Common modules include private and occupational legal protection, motor legal protection, residential and property legal protection, and contract and damages legal protection; in the commercial context, corporate and employment legal protection are added. Insurers offer these modules both individually and as a combined legal protection package.
Coverage Assessment and Prospects of Success
Before committing to cover costs, the legal expenses insurer regularly assesses whether the intended legal action has sufficient prospects of success; where the insurer and the insured disagree on the prospects of success, the law in many jurisdictions provides for an arbitration procedure in which an attorney jointly appointed by both parties makes a binding decision on the cost commitment. An agreed waiting period between policy inception and the first insured event is intended to prevent adverse selection by disputes that were already foreseeable.
Comparison and delineation
Legal expenses insurance is a family of modules covering the insured’s own litigation costs; employment legal protection is one such module, sitting alongside private, motor, and property legal protection within the same policy or package. It must be distinguished from liability insurances such as D&O or EPLI, which respond to third-party damages claims against the insured rather than funding the insured’s own pursuit or defence of a claim – legal expenses cover pays regardless of who ultimately prevails, subject to sufficient prospects of success.