The basics of pre-paid legal services
Legal services are necessary to draft purchase contracts, represent you in traffic court, give you tax advice, or even help you through tough times like the death of a relative or a divorce. But legal service fees, much like medical bills, can pile up at a very fast rate.
Many people cannot afford to hire a lawyer every time a specific task is necessary, and this is where pre-paid legal services are useful. The service acts much like medical insurance in that members pay a monthly fee in exchange for access to services on call. Employers may even pay for it as a benefit. This system has existed in Europe since 1907, and is just recently gaining popularity in the United States.
|For a list of companies that offer pre-paid legal services, see the American Prepaid Legal Services Institute.|
Pre-paid legal service plans work much like HMOs. The risk for legal services is pooled and spread over a large group of customers. Members of the group pay an annual fee and have access to an established network of attorneys for advice and service, just as HMO members have access to a network of physicians. And like HMOs, plan members can always choose to use a lawyer out of network, though the plan won't pay for it.
|Common services covered by pre-paid legal plans
According to the American Prepaid Legal Services Institute, almost every plan provides legal advice and consultation by telephone as a basic service and may include brief office consultations, review of simple legal documents, preparation of a simple will, and short letters written or phone calls made by a lawyer. Other plans offer more comprehensive coverage for trials, marital problems, bankruptcy, and real estate matters. Most plans also offer coverage for the member’s spouse and dependent children as well..
What plans are there, and how much do they cost?
Pre-paid legal plans are typically offered in two models: "access" and "comprehensive." While every plan differs in the specifics of what it covers, access plans generally cost much less and provide quick access to an attorney for advice and simple legal services. Access plans average about $150 per year for a family, or as little as $9-25 per month for individuals.
If you sought an attorney's help on your own, hourly rates average anywhere from $145 per hour up to $210, so if you use a lawyer just once a year with a pre-paid legal plan, you've probably saved yourself money. But be aware that some plans require a co-pay for services just as there is for doctor visits and prescription medications.
Advantages of pre-paid legal services
Comprehensive pre-paid legal plans provide a much broader range of services that require more time and effort on the part of attorneys, such as wills, trusts, deeds, or contracts. Comprehensive plans can provide for legal representation in negotiations and in court cases such as divorce or child custody, and in some cases may cover all costs involved in litigation.These plans can cost $300 a year or more and are most beneficial to people who own more than one piece of real estate, have complicated family situations with wills and trusts, or who run their own business and need business support and advice.
In both cases, benefits often have caps or maximums, but comprehensive plans will usually have higher limits.
The benefits of pre-paid legal plans, particularly the more affordable access plans, include easy access to an attorney, significant cost savings, and, in many cases, preventive services that can help with issues before they reach crisis proportions. For instance, you may be able to call on a lawyer for advice on mediating a dispute with a neighbor over property lines instead of arguing until the dispute becomes a lawsuit.
Plans can vary in their offerings but most offer unlimited phone access to a lawyer as part of the plan. Some go as far as to offer unlimited office visits, depending on which plan you've paid for. Members are usually allowed to choose any attorney from the network, but sometimes you'll have to select an alternate due to caseloads.
Why choose pre-paid legal services?
A sudden accident can leave you vulnerable legally, even though you are protected very well with other, more common insurance, like health. Even though you may be covered very well in terms of medical bills, legal bills can sap you dry of your finances before you know it.
According to the American Prepaid Legal Services Institute, for the consumer, legal services are among the most difficult services to buy. Consumers are uncertain on how to tell a good lawyer from a bad one. A legal plan lets a member talk to a lawyer whenever they think they might need one, which may eliminate confusion. Problems can be quickly addressed and resolved.
What to look for
In addition to a clear outline of what is and is not covered under the pre-paid legal plan, there are a few more things to consider when signing up for pre-paid legal services. The plan should have directions on how to resolve a dispute with or complaint against an attorney in the plan.
Pre-paid services vs. legal insurance
"Pre-paid legal services" offer specific services for a reduced price. You pay your annual fee and the plan pays the lawyer bills.
"Legal insurance" can also include coverage of specific legal services, but its main function is to protect an individual against all legal costs.
Legal insurance will reimburse the policyholder or pay on behalf of the policyholder all fees, costs, and expenses for legal services including court judgments, up to the policy limits.
In addition, legal service insurance will provide bail money, something most pre-paid legal services do not provide.
Legal insurance will also pick up where your auto or home insurance leaves off. For example, if you are sued for recovery of damages in a car accident because they exceed your insurance limits, legal services insurance can kick in to protect you.
Legal insurance also does not restrict your choice of attorneys to a network, but rather will provide coverage regardless of which attorney you select. However, legal insurance is much harder to obtain in most states because few insurance companies offer it. Pre-paid legal plans are much more accessible to the general public.
There should be information on secondary sources for resolution as well. In states that have legal insurance laws, your state department of insurance will regulate the plans. However, not all states have specific laws addressing legal insurance. In that case, each state's bar association can provide an outlet for complaints against attorneys.
In addition, if you sign up for a legal-services plan with your employer as part of workplace benefits, the legal services are covered under the federal Employee Retirement Income Security Act (ERISA). This federal regulation is a guideline to how employee benefits are managed and provided to employees.
Choosing your attorney from the network list is up to you, so you'll want to do a little homework before making your selection. If you already know an attorney on the list, it makes it easier, but if you're looking at a list of strangers, it's buyer beware. You can contact your state bar association to find out if complaints have been filed against particular attorneys. If the plan you've joined has other members whom you know or work with, you can ask them for references. Groups and employers that offer these plans should have researched law firm or attorney backgrounds before selecting them, but it always pays to back that up with your own research.
Make sure you review your existing insurance policies before selecting your pre-paid legal plan. Some legal protections and defense costs may already be covered, and you don't want to pay for coverage twice. For instance, your car insurance protects you in the case of car accidents with liability and medical coverage. Your home insurance covers you in the case of injuries on your property. If your policies already include these, don't pay for them again in a pre-paid legal plan.
Pre-paid legal service plans are available to individuals or families through legal service organizations and sometimes through churches, educational institutions, alumni associations, business groups, credit unions, and employers.