Household insurance customers of Personal Insurance Plan can obtain free legal expenses cover in a deal with Lawclub Legal Protection, part of Cornhill.
PIP said the abolition of legal aid for people pursuing personal accident claims has increased the pressure on insurers to provide legal expenses cover.
The personal insurance provider offers branded household insurance to customers of Thames Water and Anglian Water Direct.
These customers will now benefit from a saving of £150 on stand-alone legal cover which has no hidden excesses or deductions from legal settlements.
PIP's legal expenses policy provides up to £50,000 cover for personal injury claims and up to £25,000 for other disputes. There is also a 24-hour helpline and a mediation service for potential neighbour disputes.
PIP managing director, James Cashmore, said legal expenses cover is becoming increasingly necessary in a society that is becoming more litigious.
At the moment PIP offers home and motor insurance services but this will be extended to include travel, personal accident and pet insurance in the near future.