21st February, 2019

Letter of Demand – what is it?

Letters of demand are just as the name suggests – letters that demand an action (usually payment of a debt) to another party. Letters of demand are used across the business world and it is not just an insurance term. However it can be a very important part of insurance claims. Have you ever been asked to supply a letter of demand as a part of your claim and wondered exactly what it meant?


Why are they needed?
Letters of demand help substantiate a liability insurance claim when someone else is holding you responsible for the costs of loss or damage. As an example, if you have caused damage to a client’s property during your work at their premises, then the client would need to substantiate their claim against you, the letter of demand is the legally accepted document that starts this process. This doesn’t mean that the letter of demand will automatically be accepted and their costs paid by your insurer but it is the document that triggers the rest of the claim process.


When are they needed?
Letters of demand are needed for claims where someone else is holding you responsible for their damage or vice versa if you are wanting to claim against someone else for damage they have caused to you. The most common claims where letter of demands are required are public liability, professional indemnity and motor vehicle claims.


What should be included?
There’s some specific and important information that should be included in a letter of demand. It should include the details of the debt that payment is required on (for an insurance claim this refers to the loss or damage that happened that triggered the claim). It should clearly state that the sender of the letter believes the receiver is responsible for payment of the debt and the amount of the debt. It should include documentation to support the amount claimed and a date by which action should be taken by.

When writing a letter of demand you should include:
• the date of the letter
• your full name (including your company name if applicable)
• your contact details
• the full name of whom the letter is address to (including their company name if applicable)

The letter should clearly tell the receiver that:
• they owe you money / have a debt with you
• how much the debt that is owed
• a date by which you want to receive payment by and how you wish to receive payment
• that you may take legal action if the debt is not repaid by the specified time and that they may be responsible for your costs and interests on the debt

Once you have sent a letter of demand it is important to keep a copy for your records.


Knowing the purpose of letters of demand and how to write one is important, but it is equally as important to know when to ask for one from someone else. If a third party is holding you responsible for payment due to some sort of loss or damage and you wish to make a claim on your liability insurance, you will need to request a letter of demand from the third party and documents that support the amount they are claiming from you.

Author: Murray Bruce