Are Pre-Paid Legal Services a Good Idea?
Nearly everyone has been exposed to offers for pre-paid legal services at one time or another. While the United States has more lawyers than any other country in the world (and more lawsuits, too), pre-paid legal plans have never become very popular here. They are quite popular in Europe, however.
Are they a good thing? Are they a scam? It really depends on what type of legal services you're likely to use. Read on and see if it makes sense for you.
What exactly is a pre-paid legal plan?
A pre-paid legal program is similar to an insurance policy. The subscriber pays a recurring fee for certain legal services; the services might be included with the subscription fee or offered at a reduce rate. Plans vary dramatically in what they offer and their cost. Be sure to know what you're getting before you sign on the dotted line.
- Low cost services. If you know you're going to have a regular use for a lawyer, it can be beneficial. For example, if you're a real estate agent, you could have all of your clients sign up for pre-paid legal services and then use the service for deed preparation. You would likely get a commission and the client would save a little money.
- Keep in mind that the services are not for commercial purposes, so in the above example the real estate agent couldn't use the services for the legal needs of his real estate business. However, the people buying / selling their property do make out well.
- Free phone calls. Most plans offer free advice over the phone. Over 50% of legal issues can be handled with a phone call and a little follow-up.
- Minor legal issues are essentially free, provided that you are paying your dues.
- Free legal forms. Pre-paid plans offer a library of free legal forms that can be used by members.
- Legal problems can still cost a bundle. If you ever have to actually go to court, the included services run out quickly. You may be entitled to a specific number of hours for 'free', but preparing for court can take hundreds of person-hours. While you might get a discount for those hours, you could get the same discount elsewhere if you shop around.
- The quality of legal representation might be less than stellar. The member law firms tend to be new lawyers or less-successful law firms, growing their businesses with discount services. In fact, when a pre-paid legal company was sued recently, they hired a high-powered Manhattan firm to represent them, not one of their pre-paid legal affiliates.
- So common or minor legal issues are fine for them to handle, but you may want to look elsewhere for legal help on complex issues.
Who should consider using prepaid legal services?
If you're likely to have a significant amount of legal busy-work in the near future, they can make sense. If you need to have your will reviewed and you're buying a house and selling a business in the same year, then it can make a lot of sense.
If you don't have any foreseen legal issues or do have major legal issues, a pre-paid plan probably isn't in your best interest.
Pre-paid legal services are here to stay, but it is doubtful they’ll ever be widely accepted. The average person rarely needs a lawyer. When they do need a lawyer, the limited services and questionable skill of the legal provider might not be sufficient.
Do some research and see if it makes sense for your situation. Just be certain that your source of information isn't just trying to sell pre-paid plans. There may be times in your life when a pre-paid legal plan can save you some money and other times that you can do without.