How does the policy treat the payment of excess and legal costs?
Policies can be written with costs inclusive or costs exclusive excess. This will affect whether an excess is payable towards the legal and defence costs (costs inclusive) or is only payable towards the settlement of any Claim and not towards the legal and defence costs (costs exclusive). ‘Costs inclusive excess’ = ‘the insured pays the excess towards the legal defence costs’. ‘Costs exclusive excess’ = ‘the insured does not pay any excess towards the legal defence costs but only pays the amount of the excess towards the claim’. In addition, the insured needs to consider whether the policy is written with an inclusive or exclusive sum insured. This will affect whether the sum insured covers the claim with a separate sum insured for defence costs or is intended to cover the claim, plus the insured’s defence costs. ‘Inclusive sum insured’ = legal costs and the claim are paid out of the one sum insured. The limit must be sufficient to cover the claim and the legal costs. ‘Exclusive sum in
