Friday, 23 October 2015

Frequently used legal cost insurance lingo



A legal cost insurance product would typically cost you between R40 and R270 per month and would normally empower you with R40 000 – R200 000 legal cover per year – subject to the terms and conditions of your policy wording.

Speaking of the terms and conditions of your policy wording, do you really understand all the lingo and insurance mumbo jumbo used? We have compiled a short list of frequently used industry terms for your convenience.


Commencement date: This is usually the date on which your first monthly premium is paid and your policy is activated. This date may, however, change to a later date if you skip a payment. More importantly, this date is used to determine whether you are covered for a specific legal incident. Similar to vehicle insurance where you cannot crash today, take out vehicle insurance tomorrow and then demand cover/ your car to be fixed at the vehicle insurance’s expense, legal cost insurance typically only covers legal problems that occur after the commencement date, when you are already a paying policyholder.

Cause of action date: This is the date on which your legal problem originated. For litigation cover, this date must fall after your commencement date. If you are claiming for your divorce to be covered, the legal cost insurance industry would most probably ask when was the last time you and your spouse slept together/ when was the first time your spouse moved out of the room or house. You may be requested to sign an indemnity form, promising that all facts presented to the legal cost insurance company are true and that, should it be proved otherwise at a later stage, your fraud will for example also result in you paying the entire legal bill yourself.

Just to use another example: if you are seeking legal cover to institute a claim against someone owing you money, the cause of action date will be the date this person first defaulted and failed to pay in terms of the agreement between you two. Thus the cause of action date is not the date you two first entered into a loan agreement, but the date he/ she defaulted and failed to pay in terms thereof. This default date must then fall after the commencement date of your policy.

Litigation rejection letter: If you request litigation cover and it is rejected, the legal cost insurance company must provide you with a written rejection letter stating the reasons why you will not be covered. You may send this letter, together with a copy of the terms and conditions of your policy guide, to the Ombud for Short-term Insurance should you not be in agreement with the reasons provided.

Statutory disclosure: This is a document sent out with your policy documentation and you MUST by law receive a copy of the legal cost insurance company’s statutory disclosure. This disclosure must contain the details of the Ombud for Short-term Insurance, the details of the Insurer, company details and the details of the company’s compliance officer. Keep this document safe. A legal cost insurance company is typically underwritten by a bank or an insurance company to ensure further protection of the policyholder. Legal Hero is for example underwritten by Guardrisk Insurance Company Pty Ltd.

Should there be any other jargon worrying you, please feel free to reply in the comment section below.

Knowledge is power. We wish you a wonderful Friday and weekend.

Yours sincerely,

Legal Hero

www.legalhero.co.za

Equal protection of the law?



The only problem is that the law is very expensive. People earning less than R5500 per month may have access to free Legal Aid. The rest may need to fork out hundreds of thousands for legal help. Unless you have legal cost insurance = payment of an affordable and fixed monthly premium that pays out and covers you in your future moment of need. 

Section 9 of the Constitution of the Republic of South Africa, 1996 further reads, 

‘Everyone is equal before the law and has the right to equal protection and benefit of the law.’ 

The truth is that everyone is not always equal before the law if you cannot make use of the law (when you do not know how to enforce your rights, do not qualify for free legal aid and cannot afford the assistance of a private legal professional). 

Legal cost insurance is not a new concept and started out in the United Kingdom and Canada. Often referred to as ‘pre-paid legal services,’ protection is secured for future legal and litigation costs as per the terms and conditions of the relevant policy. Different to life insurance, legal cost insurance is a short-term insurance product. It is vigorously regulated by many acts with a few more developments on the horizon. Treating customers fairly is paramount. 

Legal cost insurance also has its own Ombud. The Office of the Ombudsman for Short-Term Insurance acts as a mediator/ arbitrator to assist consumers with complaints concerning service or a litigation rejection received in contrast with the terms and conditions of the policy. The service is free, however, only available once the complaint has been lodged with the legal cost insurance company first. If the complaint remains unresolved, same may be sent to the Ombud: P.O. BOX 32334, Braamfontein, 2017. Tel: (0860) 726 890 / (011) 726 8900 | Fax: (011) 726 5501. Email: info@osti.co.za.

Knowledge is power. 

Yours truly, Legal Hero 

www.legalhero.co.za