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Business Legal Expense Insurance (LEI): What It Is & How It Helps

Updated: November 24, 2022

When you’re a business owner, you never know when you’ll need to pay legal fees. Or you might need to reimburse employees for their time spent on company business or cover the costs associated with a lawsuit. That’s where business legal expense insurance comes in. Read on to learn more.

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    KEY TAKEAWAYS

    • Business legal expense insurance (LEI) is a type of policy that can help cover the costs of legal action relating to your business.
    • Potential benefits of LEI include protection from expensive legal fees, court expenses, and more.
    • Before purchasing an LEI policy, be sure to research different providers and compare policies to find the best fit for your business.

    What Is Business Legal Expense Insurance?

    Legal expenses insurance (LEI) covers various legal expenses incurred. It is often written on an individual basis. Clients can access legal advice and guidance. Plus, there’s coverage for legal costs once a claim gets accepted. This applies to both cases brought against and by the policyholder.

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    How Does Legal Insurance Work?

    Business legal expense insurance (LEI) is a type of insurance that helps businesses cover the costs of legal action. This can include things like court fees, lawyers’ fees, and other expenses associated with taking legal action. 

    LEI can help businesses protect themselves from the financial risk of legal action. It can also help them access the best possible legal representation.

    What Are the Two Types of Business Legal Expense Insurance?

    The two main types of legal expense insurance are After-the-Event (ATE) and Before-the-Event (BTE).

    BTE insurance buyers are typically small to medium-sized businesses that don’t have in-house counsel. However, the policies can address unforeseen legal events that could impact the business. BTE insurance is usually purchased through a broker.

    Legal insurance policies are essential for many businesses. It’s important to know your legal insurance needs as a business owner. If someone takes legal action against your business, you want to know you have financial protection.

    Your type of business can dictate the coverage you need. With BTE, you might have a legal question that you want answered. Or you might face criminal charges and need insurance business coverage.

    When faced with legal proceedings, you want to know you have the right legal services on your side. Be sure to ask your agent about your insurance policy. It’s important to know what your commercial insurance coverage entails. 

    If you don’t know where to start, take the time to get legal assistance. See if you need legal expense coverage in your business. 

    Legal expense insurance plans are an added investment. But they can ensure coverage for unforeseen events. 

    Even self-employed individuals can invest in health insurance coverage and other policies. If you don’t know the best fit for your needs, speak with an advisory service. They can provide advice on business matters. For instance, your rules for health insurance and health insurance costs.

    There are also plans that can protect your business from damages. With an advisor for advice, you can be sure to make the right investment regarding your coverage.

    What Expenses Does LEI Cover?

    Your business legal expense insurance policy will cover a wide range of potential legal expenses, including:

    • Legal fees and expenses associated with defending your business against employment claims. i.e., wrongful dismissal, discrimination, or harassment
    • Legal fees and expenses associated with commercial disputes, such as breach of contract or debt collection 
    • Legal fees and expenses associated with regulatory investigations or proceedings 
    • Fines and penalties imposed by a court or regulator (up to the limit of your policy) 
    • Costs incurred in relation to an appeal 
    • Professional fees for consultants, experts, and witnesses 

    It’s also important to read the fine print of your policy carefully to make sure you understand exactly what is and isn’t covered. Some policies will have sub-limits for certain types of expenses. 

    Examples include appeals or regulatory proceedings, so it’s important to be aware of these before you need to make a claim.

    Who Can Benefit From Legal Insurance?

    Business legal expense insurance (LEI) can be a valuable tool for companies of all sizes. It can help businesses manage the costs of legal action and protect them from potentially crippling expenses.

    There are a number of different types of legal expense insurance. But most policies will cover the costs of legal fees, court costs, and other related expenses. This type of insurance can be particularly helpful for small businesses without the resources to handle these costs.

    LEI can also be beneficial for companies that are facing potential lawsuits. By having this type of coverage in place, businesses can reduce their exposure to costly litigation.

    In addition to protecting businesses from financial hardship, LEI can also help them manage risk. By having this type of insurance in place, businesses can be more prepared to handle potential legal issues that may arise.

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    Examples Of LEI

    There are various types of LEI policies available to business owners, and the right policy for your business will depend on a number of factors. Here are a few examples of the types of LEI policies that are available:

    Product Liability Insurance

    Protects businesses from claims arising from injuries or damages caused by products made or sold.

    Professional Liability Insurance

    This insurance protects businesses from claims arising from professional negligence, errors, or omissions.

    Employment Practices Liability Insurance

    Protects businesses from claims arising from employment-related issues, such as:

    • Discrimination
    • Sexual harassment
    • Wrongful termination

    Commercial General Liability Insurance

    This type of insurance protects businesses from claims arising from:

    • Bodily injury
    • Property damage
    • Personal injury
    • Advertising injury

    Business owners should consult with an insurance agent or broker to determine which type of LEI policy is right for their business.

    Summary

    Business legal expense insurance (LEI) is a policy that can help your business cover the cost of certain legal expenses. These policies can vary in terms of what they cover. But most will help pay for things like attorney’s fees, court costs, and settlements or judgments against your business. While LEI isn’t required, it can be a valuable asset for businesses of all sizes.

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    FAQs About Business Legal Expense Insurance

    What legal expenses mean?

    Legal expenses are the costs, fees, and expenses incurred by any person indemnified herein. Also included is counsel:

    • Investigating
    • Preparing
    • Defending
    • Providing evidence
    • Documentation
    • Taking any other action on any claim

    What is a legal expenses insurance policy?

    The most common cases covered by legal expenses insurance. Refers to discrimination or unfair dismissal at work. Also, injuries resulting from accidents that were not your fault. Disputes concerning defective goods and services.

    What type of account is a legal expense?

    These are indirect expenses that a business incurs and are therefore nominal accounts.

    What is legal defense insurance?

    Insurance defense is a legal representation of legal issues related to insurance. An attorney representing insurers might work in a law firm that represents insurance companies. Or as staff accountants for the insurance company.

    Can I buy legal expenses insurance?

    You’ll need to partner with providers that offer legal expense insurance.

    Why is legal insurance important?

    This insurance protects you from the unexpected. Moreover, it offers protection that other policies might not cover.

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