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Are Prepaid Legal Plans Worth It?
Posted By Jim On 01/13/2010 @ 7:20 am In Personal Finance | 92 Comments
A few years ago, my former company began offering prepaid legal plans as an employee benefit. I forget the exact terms of the deal but it worked a lot like medical insurance. You pay a set amount each month and you had access to the plan’s pool of lawyers. The pool could prepare certain documents for you, such as draft a will, and you could have consultations several times a year.
As young professionals, none of my friends took advantage of the plan because there didn’t seem to be a need for it, but I wondered whether prepaid legal plans were worth it.
I did some research online and plans start around $15-30 a month, which was in line with the monthly cost of my former employer’s plan. What you get will vary by state because the prepaid legal firms are really intermediaries between you and a law firm. There are also add-ons you can buy, like $1 a month for 24-hour service, plus a la carte legal services in addition to the prepaid plan itself.
What do you get? For the basic family plan I looked at, you had unlimited phone consultations, one call or letter (meaning the attorney would call or write a letter as your representative), unlimited personal document review (up to ten pages each) and one business document review, and one individual Will. Most plans will offer similar services, with varying limitations.
Prepaid legal is a lot like medical insurance. You pay a fixed amount each month, regardless of how much you use it, and you can get access to a lawyer when you need it without paying additional fees for each service. Your annual legal costs are set and you won’t have to worry about having a particularly bad legal year extend into your finances (at least in the case of legal fees).
Since most prepaid legal plans offer unlimited phone consultations, it can pre-empt potential legal issues. If you aren’t sure about something seemingly minor, like cutting down a tree, you can call up your lawyer for advice. You may find out that you need an arborist to supervise or the permission of your neighbor.
This is the classic case of buffet vs. a la carte. With prepaid legal, you pay a set fee each month, regardless of how often you use it, and get to pick from a menu of services they provide. Otherwise, should you want those services, you pay per service.
Thinking back to the last year, I’ve only needed a lawyer once – when I was given a speeding ticket in North Carolina. For those keeping score at home, you know that I live in Maryland so self-representation was out of the question and in order to avoid getting points on my license (which insurance companies love), I paid a NC lawyer ~$200 to represent me in administrative traffic court. In my particular case, I don’t believe prepaid legal services would’ve helped but that’s the type of scenario where one could have helped.
One of the benefits touted by some prepaid legal services is access to a database of legal documents. You can pick up legal documents almost anywhere, the real value is in having a lawyer’s trained eye reviewing them. If you want legal forms or documents, you can do a search on Google for them. When you find a form, make sure it’s for your state (or the state it will be used in).
As for going a la carte, you can just open up your yellow pages or ask your friends for a lawyer to fit your needs. Interview them as you would anyone else you are buying something from (like home improvement contractors) and find out whether their services are what you need.
If you prefer going the online route, Legalzoom is always an option. You can prepare a Will for as little as $69 that includes a personal “Peace of Mind” review in addition to the automated checks for spelling, grammar, completeness, etc.
So are prepaid plans worth it? I’m not entirely sure they are. When you consider many of the a la carte services are “one and done” types of services (how many Wills will I need to have prepared?), I’m thinking going a la carte is probably better.
Do you have any experience with these types of services?
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