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When trouble arises in business, the situation often ends up in court. Negotiations and lawyers are expensive. Legal expenses insurance covers the costs.
In business, things don't always run smoothly. Even those who work conscientiously can be drawn into legal disputes by customers or suppliers. Lawyers and courts are expensive. Legal expenses insurance covers the costs. Insurance critics recommend that self-employed individuals take out legal expenses insurance. Anyone at risk of getting into trouble with employees, clients, or suppliers should be able to defend themselves – regardless of the size of their bank balance. That's the true value of this insurance. After all, being right and getting justice are two different things.
Legal expenses insurance helps you get your rights by covering the costs involved. This begins with an initial legal consultation. This is often offered purely as a precautionary measure (without a legal claim arising) to avoid later legal disputes. Many insurers have set up practical hotlines for their customers for this purpose. The core of the service, however, extends to the conduct of legal proceedings, across multiple instances. Insurance covers attorney fees and court costs, including compensation for witnesses and experts called by the court. This also applies to the opposing party's costs if the insured party has to bear them. The coverage can only be limited to the agreed sum insured, so it shouldn't be chosen too fussily. Premium offers often even offer unlimited coverage.
The alternative to litigation is out-of-court dispute resolution. Most legal protection insurers also cover the costs of such mediation. Another additional service, called "debt management," is often automatically included in legal protection policies for businesses or can be added for an additional premium. Depending on the terms and conditions, the insurer will provide a certain number of credit reports on business partners free of charge or at a reduced rate. This service is particularly valuable when payment behavior is poor and the risk of insolvency is high.
But not all legal protection insurance is created equal. On the contrary, the policies are a highly individual matter. They are offered according to a modular principle. The many individual modules each cover only certain areas. There's no such thing as a complete, worry-free package for every conceivable case. Considering the legal profession, this is certainly a good thing. The Association of Insured Persons (BdV) certainly believes this. The policies aren't cheap anyway, due to the high legal and court fees.
Operations management
Operations management
Operations management
It's therefore worthwhile to carefully consider which components are important to your business, and which can most easily be dispensed with. It's best to prioritize the individual components for yourself using our list of "Important Legal Protection Components." In principle, the legal protection you choose can be limited solely to the business and its employees, or it can also cover the owner's family members. Unfortunately, the high degree of individuality in legal protection insurance makes it difficult to compare the policies offered. Ratings usually provide a good guide. However, leading analysis firms do not offer market evaluations for commercial legal protection insurance. Price alone is of little significance. The BdV generally recommends obtaining several quotes. You can usually save on premiums by paying a deductible. This can be €150 or €200 or more and is due for every claim – unless the opposing party has to bear the entire costs of the legal dispute.
These policies aren't designed for litigants. Therefore, caution: In the event of a claim, any party, including the insurer, may terminate the contract properly. However, this right of termination may only apply to them after two claims per year. However, there's a risk that this will also make things difficult for other companies with the same policy.
Source: GDV; company information
No insurer can insure burning buildings. Therefore, companies protect themselves against fraudulent claims with grace periods. Typically, the following insurance coverage is only activated three months after the contract is concluded:
The following modules eliminate waiting times:
Source: GDV
In the past, German lawmakers took strict measures to prevent conflicts of interest in insurance disputes. A customer of an insurance company could not simultaneously purchase legal protection insurance from that company. This so-called separation of lines of business was intended to ensure that an insurance company did not have to enforce its claims against itself. This separation of lines of business made specialized insurers such as Düsseldorf-based Arag, Munich-based DAS (now part of the Ergo Group), and Cologne-based Roland Rechtsschutzversicherung prosper. The other companies brought them business.
In 1990, the EU overturned the strict German standard. Since then, all insurance companies (except life and health insurers) have been allowed to conduct legal protection business. The only condition: claims settlement must be outsourced to a legally independent company. Today, full-range insurers are permitted to offer legal protection insurance without hindrance. Anyone who wants to avoid conflicts of interest should ensure that their legal protection does not come from the same company as their business insurance. Incidentally, disputes against their own legal protection insurer are excluded from insurance coverage.
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