The difference between indemnity insurance and legal expenses insurance

Legal expenses insurance pays the legal expenses of a legal dispute. Win or lose it pays your legal costs and any legal costs you are ordered to pay to your opponent (but subject to a limit in the policy). Subject to the specific terms of the insurance policy, legal expenses insurance can pay for you to bring a legal claim against someone else, or for you to defend a claim brought against you (or both) but if you lose a claim brought against you and are ordered to pay compensation (damages) to your opponent, you have to pay that yourself. 

With indemnity insurance, however, the insurance company actually pays the compensation you are liable to pay to your opponent so that you don't have to find the money yourself. And if a court claim is brought against you, the insurance company will pay the costs of that as well. Essentially because the insurance company will (subject to policy limits) be paying the compensation in the end, it is up to them whether they fight a court case in your name or settle, but they pay for it. An example of indemnity insurance is Public Liability Insurance which may cover, for example, claims against you for injuries caused to visitors by the state of your premises. 

Sometimes people have insurance without realising it. For example many house insurance policies provide legal expenses insurance and indemnity insurance - in certain areas of law and subject to certain exclusions, of course. If you are a member of a trade union or professional body you may find that insurance is included in your membership fee.   

The above explanation is only an overview and in order to be reasonably concise I have had to leave some details out - details which are likely to affect what the law would say about your own situation. So please do not rely on the above: it is just an indication of possible sources of legal funding and of questions you might want to ask.    

This page  was lasted updated in October 2018        Disclaimer