Employment legal expenses insurance – what to look out for

An employment dispute can quickly result in high costs that are difficult for employees to bear. Employment legal expenses insurance (ELI) can help in such cases by covering legal and court costs. But what should you look out for? When is ELI really useful, and which areas should be covered? What are the costs, services and waiting periods? The answer is usually in the small print, and to save you from having to read them all, we have summarised the answers here at a glance. In the article, you will find everything you should consider when it comes to legal expenses insurance in employment law.

The most important information at a glance:

• Coverage of costs in legal disputes: Employment legal expenses insurance covers legal fees and court costs in employment law disputes such as dismissals and warnings.
• Modular cover: legal expenses insurance consists of various modules (employment, personal, traffic) that can be flexibly combined. It makes sense to only select the areas that are necessary.
• Cost risk in the first instance: employees bear their own costs in the first instance, regardless of the outcome of the proceedings – this is where legal expenses insurance can protect you.
• Be aware of waiting times: Legal expenses insurance often has a waiting period of three months, sometimes six months, so it is important to take out the insurance early.
• Alternatives to legal expenses insurance: Trade unions and free initial consultations with lawyers also offer support in employment disputes.

1. Why do you need legal expenses insurance?

Have you received an unjustified dismissal or written warning, or are you facing other legal problems with your employer? A legal dispute can quickly cost several thousand euros. Legal expenses insurance can cover these costs, but there are a few things you should look out for.

What is legal expenses insurance anyway?

Legal expenses insurance is an insurance contract that covers the costs of legal disputes. This includes both the fees for a lawyer and the court costs. The insurance usually applies when you have to assert or defend legal claims.

Especially in the context of work and employment, it is often worth considering legal expenses insurance. This is because, unlike in other legal disputes, such as in traffic law, employees have to bear their costs themselves in the first instance – regardless of whether they win or not. Employment legal expenses insurance can protect against this. It is important to weigh up the costs and risks carefully. We show you what to look out for in legal expenses insurance.

What types of legal expenses insurance are there?

When taking out legal expenses insurance, it is important to note that it can usually be taken out for different areas or modules. These can usually be combined using a ‘modular principle’. Important modules include:

1. Personal legal expenses insurance: For private disputes.
2. Employment legal expenses insurance: For employment disputes.
3. Tenancy law protection: For disputes in the tenancy.
4. Traffic law protection: For questions in traffic.

In addition, options such as traffic law protection for drivers or extended services for particularly complex cases can be added. In principle, the modules can be taken out individually, but many providers only offer ‘occupation’, for example, in combination with ‘private’. Before taking out the policy, you should therefore think carefully about which situations you want to insure and which module covers them.

Legal expenses insurance in employment law

With most legal expenses insurance, protection in employment law is only possible in ‘private and professional’ packages or larger. With a waiting period of 3 months, employed singles can for example find these offers:

Roland Rechtsschutz	private, professional & traffic	From 22 euros per month (150-300 excess)
ADAC	Personal, Professional & Traffic	From 22 euros per month (150-300 excess)
ARAG	Personal, Professional & Traffic	From 31 euros per month (150-300 Selbstbeteiligung) Possibly in selected cases in employment law without a waiting period
DEVK	Personal, Professional & Living	From 25 euros per month (150 excess)

What does employment-related legal expenses insurance usually cover?

Various conflicts can arise between employees and employers. Employment-related legal expenses insurance covers important cases such as:

• Written warnings: Protection against unjustified written warnings.
• Dismissals and severance pay: Support in disputes relating to dismissals and severance pay.
• Missing salaries: Entitlement to outstanding salary payments, holiday and Christmas bonuses.
• Overtime pay: Clarification of overtime pay.
• Employment references: Disputes about employment references and other important documents.
• Protection of minors and mothers: Safeguarding the rights of employees under special (dismissal) protection.

Can I choose the lawyer?

An important point when choosing legal expenses insurance and one that should be given attention: ‘Can the insured person choose their own lawyer or does the legal expenses insurance company choose the lawyer?’

The principle: In Germany, free choice of lawyer applies to legal expenses insurance, including in employment matters. The German Insurance Contract Act (in § 127 VVG) gives everyone the right to be advised by a lawyer of their choice on legal matters. This also applies if you have legal expenses insurance. A rule that forces you to use a specific lawyer is not allowed.

However, many legal expenses insurance companies offer a free initial consultation from their own network. This is optional – so you can use it if you want to, but you don’t have to. In the end, you decide which lawyer you hire – and which lawyer is best for your case. You can read about what is important and how to find the right employment lawyer for your case in our blog post: ‘Tips on how to find the right employment lawyer’. We answer further questions about the free choice of lawyer in the linked post.

2. What should you look for in employment legal protection insurance?

You are considering taking out legal expenses insurance specifically for employment law and are wondering what you should look out for. Here are the four most important points: insured disputes, assumption of costs, deductible and insurance premium.

In which disputes does the insurance pay?

The insurance usually pays in the case of:

• actions for unfair dismissal: regardless of whether you win or lose in court. The insurance will cover your legal fees if you take action against your dismissal.
• disputes about written warnings: protection against unjustified written warnings.
• disputes about employment contracts: this may, for example, concern non-compliance with contractual terms or questions about remuneration.
• Dismissals and severance pay: Support with disputes concerning dismissals and severance pay.
• Outstanding salaries: Entitlement to outstanding salary payments, such as holiday and Christmas bonuses.
• Overtime pay: Clarification of overtime pay.
• Employment references: Disputes about employment references and other important documents.
• Protection of minors and mothers: Ensuring the rights of employees under special protection.
• Pension: An RSV helps with applications for a pension and answers questions about deadlines and entitlements.

In addition to the payment in the event of a dispute, it is also interesting to pay attention to other components of the contract and service features. These include, for example:

• Telephone legal advice
• Sum insured
• Deductible
• Waiting period
• No-claims bonus
• Co-insured persons, e.g. spouses
• Right of cancellation of the RSV

Here it is important to compare the conditions of the individual legal expenses insurance policies carefully and to find out for yourself what is important to you. The waiting period and excess are explained below.

What costs does legal expenses insurance cover in employment law?

When considering legal expenses insurance in employment law, it is important to consider which costs are covered and how likely you are to claim them. Employment legal expenses insurance usually covers the following costs in the event of employment disputes. However, you should always read the exact services in the insurance conditions.

• Lawyer’s fees: The legal expenses insurance covers the lawyer’s fees in accordance with the German Lawyers’ Fees Act.
• Court costs: In insured cases, the court costs for an action for unfair dismissal (for example) and the fees for bailiffs are covered.
• Expert opinions: If necessary, the legal expenses insurance covers the costs of necessary expert opinions to help resolve the dispute.
• Arbitration proceedings: In most cases, RSV also covers the costs of arbitration proceedings to promote an amicable solution.
• Witness fees: Many RSVs reimburse the costs of witness testimony to secure the necessary evidence.
• Opposing party’s costs: The costs of the opposing party in the event that they are obliged to bear them.
• Out-of-court dispute resolution: In addition, the costs of alternative dispute resolution proceedings, such as mediation, are covered if necessary, in order to resolve conflicts efficiently and cost-effectively.

What is not usually covered by employment legal expenses insurance?

Employment legal expenses insurance does not provide protection for all conflicts with the employer. You should therefore check carefully whether the chosen employment legal expenses insurance also covers the following topics:

1. Legal advice before a dispute: General employment law advice, e.g. on the cancellation of holidays or before an employee appraisal, is often excluded because there is no dispute yet. However, some providers may offer telephone advice.
2. Threat of dismissal: Many insurers only provide protection in the event of a formal warning or dismissal, unless there is proof of an unlawful threat of dismissal.
3. Severance agreement: Costs for advice on severance agreements are often not covered, except in the case of a threat of termination.
4. Collective employment law: Costs for disputes in collective employment law, such as co-determination, are usually not covered.
5. Dismissal for criminal offences: There is no legal protection in the event of intentional misconduct, such as theft. The case may be different for suspected dismissals.
6. No chance of success: In principle, costs are only covered if there is a realistic chance of success, otherwise the cover note can be refused.

How much excess should you take in the event of a dispute?

Many insurers offer a lower premium if you opt for an excess. The usual rates range from €0 to €300 excess per dispute. For certain services, such as legal advice over the phone, there is often no excess. And with many insurance policies, the deductible is waived if a dispute is resolved after initial legal advice without going to court, or if only out-of-court mediation is sought.

How much does legal expenses insurance cost in employment law?

Since employment legal expenses insurance is only available as part of a package in most cases, it is not possible to determine a single price for legal expenses insurance in employment law. However, most insurance packages here cost around 300 to 350 euros per year. Depending on the deductible, there is still a lot of room for manoeuvre here.

Roland Rechtsschutz	personal, employment & transport	From 22 € per month (150-300 € excess)
ADAC	personal, employment & transport	From 22 € per month (150-300 € excess)
ARAG	personal, employment & transport	From 31 € per month (150-300€ excess) Possibly without a waiting period for selected cases in employment law
DEVK	private, professional & living	From 25 € per month (150 € excess)
Allianz	private, professional & transport	From 25 € per month (150 € excess)
HUK	private & professional	From 22 € per month (150-300 € excess)

When are there waiting periods (and how long are they)?

When taking out employment-related legal expenses insurance, it is important to pay close attention to the waiting period. Taking out legal expenses insurance is of no use if you have already received your notice. In many cases, there are waiting periods before you are entitled to benefits from legal expenses insurance. These waiting periods are usually designed to prevent policyholders from claiming benefits for pre-existing legal problems immediately after taking out the insurance.

The usual waiting periods are usually three or six months. During this time, disputes that are already foreseeable or have occurred are excluded from coverage. This means that during this time you cannot claim any support for legal disputes that arise after the contract has been concluded.

Is there also employment legal expenses insurance without a waiting period?

If you search for ‘legal expenses insurance without waiting period’ on the internet, you will find many results. However, according to our research (as of August 2024), there is hardly a general waiver of waiting periods. Some insurers waive waiting periods in certain areas, such as traffic legal expenses insurance, but this is not the case in employment law. We have not found any providers that offer comprehensive employment legal protection without a waiting period of at least three months.

Although ARAG offers legal protection with immediate assistance, it does not offer this if a lawyer has already been contacted or legal proceedings are pending. Furthermore, the tariff is not the cheapest, which is why it is advisable to calculate carefully before taking out the policy to determine whether this insurance is actually worthwhile, taking into account the exclusion criteria and deductible. In many cases, this will not be the case.

For detailed information on the topic of taking out legal expenses insurance without a waiting period, read our detailed article.

3. For whom does employment law insurance make sense?

If you don’t yet have legal expenses insurance, the question arises as to whether you should take out insurance now. That depends on your situation. Legal expenses insurance is particularly useful

• for employees who are expecting to receive a notice of termination but it is not yet imminent (i.e. not in the next three months – waiting period!) or
• for employees who are already in an insecure employment relationship.

In such cases, it is important to consider early on whether you need legal expenses insurance, as the costs of an employment law dispute can quickly exceed several thousand euros and the waiting period of usually 3 months (or 6 months) must be waited out.

Although employees can also file a lawsuit without a lawyer in the first instance in the case of an action for unfair dismissal and thus save on legal fees, this naturally costs all the more time and nerves. In the best case, an insurance can not only cover legal and court costs, but also protect against such worries.

Is it too late to take out legal expenses insurance?

Legal expenses insurance is of no use if you only take it out when a dispute is already pending before the labour court or is imminent, for example in the case of a notice of termination that has already been issued. In order for the waiting period of usually three months to have expired, it is important to take out the insurance in good time. There is no legal expenses insurance without a waiting period in employment law. So if you think you are at risk of losing your job and you still have at least three months left on your notice, it is advisable to take out legal expenses insurance immediately.

Are there alternatives to legal expenses insurance in employment law?

However, there are alternatives to legal expenses insurance in employment law, such as:

• Trade unions: These often offer legal advice and support. Membership can facilitate access to legal resources.
• Legal advice from specialist lawyers: Some lawyers offer an initial consultation free of charge or at a fixed price, which can be helpful in clarifying the situation.

Before taking out legal expenses insurance, check whether you are already covered by a spouse or other persons in order to avoid double insurance. Also make sure to read the exact waiting periods in the insurance conditions. Do not opt for all-round protection, but rather put together the insurance cover according to your needs with individual legal expenses packages such as ‘private’ and ‘professional’. When changing insurance companies, you should make sure that the new contract begins seamlessly to avoid a new waiting period.

Conclusion: What to look out for in employment law legal expenses insurance?

Employment legal expenses insurance can protect employees from significant costs, especially in the event of disputes with their employer. However, there are a few things to watch out for when taking out employment legal expenses insurance. Firstly, the waiting period should not be forgotten, and secondly, the individual modules should be carefully checked and an employment legal expenses insurance taken out in good time in order to benefit from the advantages. Alternatives such as trade unions or free initial consultations with lawyers can also be helpful in making an informed decision. Paying for employment law insurance for years ‘just in case’ probably makes little sense in most cases. Especially not if you’ve already been dismissed.