Legal Insurance Raises Questions
Recently, I have noticed a sharp increase in the popularity of legal insurance. These policies cover the cost of some legal services.
Those who sell legal insurance coverage hope to achieve some of the success enjoyed by companies that provide medical insurance.
There are important differences, however, between medical and legal insurance coverage.
Most of us buy medical insurance to protect us from catastrophic losses. A $100,000 hospitalization would bankrupt all but the most wealthy.
If we knew our medical expenses would be limited to a few office calls and routine tests, few of us would buy medical insurance policies. The insurance would do little more than spread our expenses evenly over the year. The premiums would also include some dollars for insurance company overhead and profit. Under these circumstances, medical insurance would not be a very smart buy. None of us, however, can predict our medical needs.
Most catastrophic legal expenses are covered by insurance that most people already have. Automobile, homeowner’s and business policies generally pay legal expenses for most of the costly matters for which the average person might be sued.
The two types of insurance differ generally in the extent of protection they provide. Most medical insurance policies are quite comprehensive; they give broad and extensive coverage to the policyholder for injuries and illnesses. Many legal insurance policies that I have seen contain exclusions and limit the company’s financial obligation on those expenses that are covered.
If you are considering buying a legal insurance policy, I suggest you do the following:
First, determine what protection you already have under other insurance policies you own, including liability for accidents you cause which may result in injuries to others or damage to property. If you have questions, raise them with your insurance agent or lawyer.
Second, evaluate your risk of needing legal services for matters not covered by your existing insurance.
Third, ask the representative of the legal insurance company to provide a complete list of covered matters together with limits on coverage and exclusions. Be sure you know what you are buying, and what you are not buying.
Be informed before you buy.