Legal expenses insurance:  Private, road traffic or both?

If your boss fires you tomorrow, if the landlord of your flat decides to evict you, or even if you get a speeding ticket at 160 km when you were driving at 123km, who will you call? Your lawyer who’s fees will cost you a pretty penny or your legal expenses which will cover the said fees? 

By the end of this short article, you will know everything about the private legal expenses insurance and road traffic, how they are used and the important clauses upon signing a contract. 

What is legal expenses insurance?

It is the insurance covering financial consequences in the event of a dispute. The law being, by definition, a complicated matter, as soon as a dispute arises, people usually seek for help from lawyers. Between the fees and the expenses related to the proceedings, the final bill always ends up being rather hefty. 

Legal expenses insurance supports you throughout the process and takes on the proceedings expenses and the lawyer’s fees. 

There are basically two fileds: one the one hand private legal insurance and, on the other hand, road traffic legal insurance. 

What is a private legal expenses insurance? 

It concerns everything that relates to your private or professional life: work, housing, insurances, purchasing of property. 

• Were you wrongfully dismissed? (Or, as we say today, were you shown the door?) 
• Did your rent significantly increase even though nothing was renovated in your apartment? 
• Did you take out a supplementary insurance which is refusing to pay for a portion of your gym membership? 
• When warm weather returned, did you purchase a motorbike but noticed later on that it had many hidden defects? 

In each one of these cases, you can always call one number: your private legal insurance’s!

One of my friends used to work as a product manager in a SME based in Lausanne. The sales were not taking off, after two and a half years of good and loyal services, he was fired (or should I say… shown the door) immediately and without notice. 

On what grounds you might ask? Repeated refusal to work. Any proof? The product was not being sold! 

This friend, alarmed at the idea of no longer making a living from one day to the next and having to suffer an unemployment penalty, immediately grabbed his phone and dialled his private legal insurance’s number. 

The advisor reassured him right away by specifying that it was not a valid proof. 

What came out of it? My friend did not go back to work but received three pay checks, that of the ongoing month and two to match the standard notice time. He then registered for unemployment the normal way and got an outstanding work certificate. 

What to pay attention to when signing a private legal expenses insurance?

Private legal expenses insurance contracts are quite standardised and therefore do not differ much from one another. You will mostly have to decide who to include in this protection: yourself alone, your family, your business, all three? The premium will vary accordingly and could increase tenfold depending on the option you choose. 

That being said, there are essentially two things to which you should pay special attention to: 

• Does it indeed cover every dispute arising from contracts? There are so many different types of contracts, from that of your employer, to a guarantee contract on an item you purchased from a private individual. 
• What about subject that are not covered by the insurance taken out? Does it still cover the first lawyer appointments? 

In general, legal protection insurance companies offer “flyers” that tell you what areas are covered and up to which amount. I strongly recommend that you take out several insurance policies and compare the benefits, choose the ones that really interest you and then ask 2 or 3 insurance companies for their prices. It’s important to compare what’s comparable and not just look at the premium.

What is a road traffic legal insurance? 

It is anything that is related to road traffic: road accidents, leasing contracts, loss of driver’s licence… 

For example, I am snug as a bug in my brand-new car. I am driving by the lakeside on a breathtakingly beautiful road. The view is godsent. The sun is slowly setting and despite the fact that it is almost at eyesight level, preventing me from seeing clearly from afar, the scene is ending a beautiful day. 

In my mind, I am going over the meeting I had at the beginning of the afternoon with this super important client: it went very smoothly and my boss even warmly congratulated me. I am looking forward to telling Zoé about all this! Distracted by my thoughts, I nearly missed a turn. The turn signal goes off, by reflex, I turn the wheel in a rather dry manner, I hear a muffled sound and then, darkness. I appears that a motorcycle tried to pass me as I was turning left. The motorcyclist ended on my car door. 

Both of us are doing fine, even though we are completely rattled by the shock. 

Now what? Who’s fault is it? Will I lose my licence? Get fired? Lose all my savings? 

Luckily, I took out an excellent road traffic legal insurance which will assert my rights to the competent authorities.  

A dispute can happen quickly, especially on the road, at a moment when we are least expecting it. This is why the road traffic legal insurance is of a crucial importance for every road user. 

What to pay attention to when signing a road traffic legal insurance? 

Just like the private legal expenses insurance, the road traffic legal insurance is a pretty standard contract with rather well-defined clauses. 

Make sure your road traffic legal insurance covers you in case of a dispute related to purchase, sale or reparation of a vehicle. 

Finally, some insurances offer specific contracts for young people, namely for individuals under 26 years old, with more affordable premiums.

Are there any alternatives to legal expenses insurance?

In recent years, the legal landscape has witnessed the emergence of a new form of protection. Some law firms are innovating by offering annual subscriptions, breaking with the traditional model of charging by the hour. These subscriptions allow clients to pay a fixed monthly instalment, offering predictability of costs and the promise of reduced potential costs in the event of future litigation. This approach, which resembles a form of preventive insurance, has provoked heated debate. Market supervisors (FINMA) are closely scrutinising these practices to determine whether they should be regulated as insurance, implying the adoption of the same rules. This debate raises crucial questions about the balance between innovation and compliance in the legal field.

Can legal expenses insurance refuse or cancel my policy?

Under Swiss law, all private insurance contracts are governed by the Law on Insurance Contracts (LCA), which applies uniformly to various types of insurance such as household, third-party liability and home insurance. Unlike compulsory health insurance, which is governed by the LAMal, private insurers are able to manage their contracts more flexibly. They can choose to accept, refuse or modify the conditions of an insurance policy on an individual basis. This means that if a policyholder is deemed to be a ‘bad’ risk after an assessment of their file, they may well be refused. Even more concerning is the fact that an insurance company may accept a customer, but after an initial costly claim, it may choose not to cover them any more and cancel the contract. This cancellation option, available to both the insurer and the policyholder, introduces a degree of uncertainty into the relationship that could prove disadvantageous to the policyholder in a critical situation.

Tips and advice on your legal expenses insurance

Tip no. 1: Assessment of legal expenses insurance by FBKConseils

FBKConseils has highlighted a worrying trend in Switzerland: over-insurance. In fact, the Swiss often have the reflex to insure themselves for almost everything, sometimes without understanding the scope or usefulness of the policies taken out. If your personal situation is simple and straightforward, there is relatively little risk of legal complications. Legal expenses insurance could represent an unnecessary cost. On the other hand, for those who are active, who often do business and who anticipate possible legal complications, taking out this insurance could be a wise decision.

Tip no. 2: When to take out legal expenses insurance

It is crucial to understand that in Switzerland, it is almost impossible to take out legal protection insurance after a legal dispute has arisen. To illustrate this, it is often said that insurance companies “won’t cover a car that’s already on fire”. So it’s essential to take out legal expenses insurance before problems arise, not in response to them.

Tip no. 3: Use your legal protection wisely

Although insurance advisers are often seen as helpful and caring, it’s important to remember that every call has a cost. It is advisable not to contact your insurance company every time you are upset. Reserve your calls for those times when you are facing a serious legal problem that could go seriously wrong without professional assistance. Abuse of your legal protection may even lead to termination of your contract.

These guidelines are designed to help consumers make informed decisions about their insurance needs, based on their personal situation and risk tolerance.