Legal Service Plans

Because the costs of hiring an attorney are often prohibitive, legal service plans have become an option for some people. The plans require payment of an annual membership fee or retainer in return for access to legal services. Like insurance policies, legal plan coverage is greatly varied; however, the plans generally provide adequate legal services for the most basic issues (e.g., wills, uncontested divorces, property transfers, adoptions and landlord-tenant disputes). Some plans offer unlimited phone access to an attorney as part of the plan, but office visits may be limited.

TIP: It is becoming more common for employers, unions, school districts and other organizations to offer legal plans to their employees and members at a reduced cost.

The cost of prepaid legal service plans varies from $100 to $400 per year. Business plans may cost more. Some plans add services and access to attorneys with every year's renewal.

Legal service plan companies typically offer two types of plans:

Access Legal Service Plans

The least costly legal service plan is one that allows the member to quickly access an attorney for uncomplicated advice and simple legal services. For instance, an access plan may include the preparation of a simple will for you and your spouse but exclude the preparation of other legal documents.

Comprehensive Legal Service Plans

Comprehensive prepaid legal plans allow the member to access a broader range of legal services. Generally, matters that require extensive time and effort on the part of an attorney are only covered in a comprehensive plan. For instance, setting up trusts and drawing up papers for the sale of business would not be covered under the basic access plan but may be available in the comprehensive plan.

Some comprehensive plans may provide legal representation in some types of court cases, such as child custody lawsuits. Additionally, representation in criminal matters may be provided. Individuals who own several real estate properties, have family trusts and partnerships, issues with complicated heirships or who need regular business advice should look at comprehensive prepaid legal plans.

How do I determine if a legal service plan will benefit me?

The plan will be beneficial to you if you own a small business and have frequent, but basic, legal questions. Additionally, if you believe you may encounter legal problems in the future, you should consider a plan.

What do I look for in a legal service plan?

Some items to look at include:

• the specific types of matters that are not covered by the plan
• the limit, if any, on matters that the plan will handle during the plan period
• the time frame for addressing a matter (length of time before a demand letter goes out, for example)
• extra expenses for which you may be responsible
• whether you can pick the attorney you want to use
• whether you can change attorneys
• the cancellation policy if you want to leave the plan
• geographical limitations of the plan (does the plan work in Florida and California if your family moves?)
• whether you can be terminated (kicked out) from the plan
• how are complaints about the plan are resolved
• how coverage appeals are handled

What is the difference between a prepaid legal plan and legal insurance?

Legal insurance works like homeowners' insurance. Its purpose is to protect the policyholder against all legal costs (as opposed to provided specific services only as in prepaid plans).

Sidebar: Legal insurance policies reimburse the policyholder for any fees, costs and expenses incurred for legal services including money judgments, up to the policy's limits.

Will a prepaid service plan defend me in a DUI charge?

Yes, but with exclusions. For instance, if you have a prior record of motor vehicle-related arrests or accidents, the policy will not cover you. Also, you may be limited to 2 to 3 hours of the lawyer's time. Your policy will probably not cover any court appearances by the attorney, although you may be eligible for a discounted lawyer's fee.

Are tax matters covered in prepaid plans?

Yes. Some plans provide legal advice and services for personal income tax matters, including audits, negotiating a settlement with the IRS and even litigation in tax court. The total amount of hours on the entire matter is typically limited to 50 hours of lawyer time. On the other hand, some plans exclude any and all tax matters from plan coverage.

TIP: Business tax matters are highly specialized and universally excluded from nearly all the plans.

I want to sue my builder for building me a defective house. Will a prepaid plan cover this situation?

No. Plans typically provide preventive legal services (wills, for example) and represent members who must defend an action. The plan may provide an attorney to negotiate with the builder or write a demand letter, but the plan will not pay the costs when you are pursuing the lawsuit.

Sidebar: The typical plan provision excludes "any legal proceeding in which the Participant is the plaintiff, petitioner or movant, with the exception of the Bankruptcy; Divorce, Annulment or Separation; Adoption; Consumer Protection and the Name Change coverages."