What is a Legal Plan?
Legal plans are a relatively common but complex option for legal help. They are subscription based; you pay a monthly fee for access to a firm of attorneys that are your first option when you need legal help. In return, those firms give you half off their already affordable rates. These plans offer a sense of security for individuals and business owners. They can defray the costs of future legal services in some cases and allow policyholders to have some level of confidence about the service they are getting without being a slave to hourly billing rates.
Legal plans were originally developed as a way to extend companies’ employee assistance programs. EAPs are contractual relationships with third-parties where the EAP provider does not actually provide the service at issue, but organizes a menu of service providers for a fee. For example, an EAP might give an employee contact information for behavioral health support or financial advice. The EAP collects a fee, and the employee gets access to resources they would not have otherwise.
Legal plans operate similarly. Policyholders pay into the plan, and then can receive a discount from a network of attorneys established by the plan . The carrier then pays the participating law firm on the policyholder’s behalf when the policyholder uses an in-network lawyer. For a business owner, this means they don’t have to shop for good lawyers. They also don’t have to worry about whether the law firm is going to surprise them with a large bill afterwards. Everything is known upfront and budgeted for when the plan is initiated.
The convenience of legal plans is huge, but there are downsides. For example, many plans are designed around a limited set of topics. This can be a good thing or a bad thing. On the one hand, it helps the attorneys who are billing under the plan to manage their workload. On the other hand, it can create situations where you may need legal help, but the help you need is not covered. Some providers will also try to nudge policyholders back to the firm even when it may not be the best choice. The attorney may not have the experience or interest in your specific legal issue, but the firm wants to protect its profit margin. That can result in billing time even outside the scope of a matter. You may have agreed to work on setting up a will, but the attorney still feels free to bill on a generic client matter form because you once set up a phone consultation to discuss your will.
Different Types of Legal Plans
There are three main types of legal plans available in the marketplace today-personal plans, small business plans and family legal plans.
Personal legal plans are plans that cover individuals for a variety of legal services. Personal legal plans typically cover services like legal phone advice, office consultations and will preparation and are offered to individuals at reduced rates. The types of services that are offered by personal legal plans depend on the plan provider.
Small business legal plans serve the needs of small businesses and small business employees. These plans allow small businesses to offer legal services to their employees. Some services are offered at no charge and others can be obtained through a subscription fee paid to the plan. Examples of services that may be offered to employees through a small business plan include: document review (such as a lease or a contract), telephone consultations, letters on behalf of the employee (to a contractor, auto repair shop or landlord), legal phone advice, office consultations and will preparation.
Family legal plans allow families and individuals to obtain services from local and/or network attorneys that participate in the plan. Again, the types of legal services covered will vary depending on the plan that is offered.
Legal Plan Cost-Benefit Analysis
The cost of legal plan membership can vary from plan to plan but is generally much less than the alternatives. The average legal expenses include membership fees ranging from $200 – $1,000 per year, an administrative enrollment fee, and an additional surcharge of $50-$75 for each legal issue that is initiated. Expenses for traditional legal work in the U.S. have traditionally exceeded $100 per hour in most cases. The average price of a will and testament is around $600 while other legal fees can run into the thousands or tens of thousands of dollars for more complex matters. Companies that need preventative legal services, such as contracts, trademark registration, or employee education on various labor laws such as FMLA, ADA, and OSHA, may find it more cost-effective to retain an attorney for periodic review of these policies than to pay on a per hour basis.
By utilizing a legal plan, committing to a yearly retainer, and covering yourself and your family members with a policy that costs significantly less than traditional attorney fees, you can save thousands of dollars a year on legal work. If you employ an average of 1200 hours a year of legal work at $200 per hour, full-time staff would cost you $240,000 per year. Even retaining two attorneys at your average hourly rate would be a savings of $236,000 per year.
Benefits and Downsides of Legal Plans
Benefits: Accessibility: Employees subject to legal plans are provided contact information for one specific law firm specializing in a particular area of law. By paying only a nominal fee for representation by the attorney of an employee’s choice, employees are granted access to legal counsel without having to pay hourly billing rates. Options: While employees are certainly not required to seek representation from a legal plan attorney, many plans will allow insureds to select outside counsel to represent them, thus allowing employees to retain counsel of their choice, other than that provided as part of the policy. Others allow insureds to substitute that legal plan group rate – generally a percentage off the attorney’s normal rate – for normal rate fees charged outside of the program, granting the insureds’ attorneys the security of a known aggregate of clients. Agility: Legal plans help employees resolve minor legal issues efficiently, freeing up their time and money that may be needed to address bigger issues if the smaller ones go unnoticed. Affordability: Monthly premiums for legal plans are generally affordable, and for an additional premium an employee may be eligible to obtain legal insurance for his family and dependents. Since legal plan services are calculated on an hourly basis but billed at a flat rate, employees enjoy cost-effective legal advice and representation. Innovations: Advances in technology make it increasingly easier for employees and attorneys to communicate via teleconference, e-mail, or facsimile, all of which make service delivery less time-intensive and help to keep costs down.
Drawbacks: Coverage Limitations: Employees should recognize that most plans will reimburse only for in-plan services that follow a schedule, and will not cover outside counsel fees or costs. Beyond that, most legal plans cover basic criminal charges such as misdemeanors; simple property crimes like vandalism; certain civil matters, such as bankruptcy; and employment related cases for wrongful termination or workplace discrimination. However, many plans either charge a separate flat fee or do not cover more serious felonies; DUI charges; some civil suits involving amounts exceeding $2,500; divorces; bankruptcy; or malpractice suits against the employee’s business. Scope: Most plans do not provide coverage for preventive legal services and only offer representation for trivial matters, rather than complex issues. Department of Labor issue: Both the Department of Labor and the Pension Benefit Guaranty Corporation have issued several releases cautioning plan sponsors against using legal plans to provide free legal services, instead advising employers to establish proper criteria for the selection of attorneys. Tethering: Employees may find themselves complacent about securing a reputable attorney until they have to use the legal plan’s attorneys. In particular, an employee with lower income may become accustomed to relying on the legal plan to help with unexpected traffic tickets, or may delay seeking outside counsel if he wanders into unexpected criminal issues due to an unexplained incident.
Situations in Which Legal Plans are Effective
Let’s examine a few real-world scenarios in which legal plans have proven to be beneficial:
Scenario 1: Mike Applies for a Loan
Mike recently applied for a new loan. He was unaware that his credit score had taken a hit due to a creditor mistakenly sending him a collection notice. Mike requested that the creditor remove the item from his credit report; however, they refused. Mike contacted his legal plan provider to see if they could help. In addition to counseling Mike on how to navigate the dispute with the creditor, the plan assigned a network attorney to sue the creditor and obtain a settlement, which eliminated the black mark from Mike’s credit report.
Scenario 2: Sarah Needs a Simple Will
Sarah is a 65-year-old retired public school teacher. She has lived in her home for decades , and would like to leave her home to her children upon her death. Sarah does not own any other major assets. Sarah was pleased to find that her legal plan allowed her to obtain a simple will at no cost. And, because she had other documents prepared, the plan provision also included a durable power of attorney and a health care power of attorney.
Scenario 3: Bruce’s Family Encounter a Problem
Bruce’s daughter was in a car accident and sustained serious injuries. Bruce, obviously, was not satisfied with the insurance payout and wanted to pursue a higher settlement amount. Given the significant injuries, Bruce needed to know whether he should pursue a suit and what to ask for. The legal plan helped Bruce understand whether the policy amount was reasonable or not.
Selecting a Legal Plan
A good legal plan can be a valuable tool for an individual or family, but choosing the right one is important. One of the most obvious considerations is the cost. For firms that charge a monthly retainer, what do they make you commit to? Our plan, for example, is a small commitment of six months, and it’s competitively priced with others. We have no hidden fees, such as monthly administrative fees.
You should also look at the scope of coverage. What kinds of matters are covered? Are there any exceptions to those matters? Which matters are excluded from coverage? Our legal services plan covers a wide variety of issues, including over 1,700 legal services found in family, estate, bankruptcy, personal injury, contract, real estate, and general business law. Some legal plan providers offer a free or reduced rate for the first consultation, but unless you need a very specific matter handled, getting a legal services plan that you can use again and again is more cost effective.
Find out who you will be working with at the firm. Not all firms offer pre-screened attorneys. Make sure you are actually getting certified and pre-screened attorneys and not just a referral to an attorney that you’ve never met before. The attorneys at the firms we recommend are pre-screened, have been with us for many years, and have excellent reputations. We offer unlimited provider office visits, and same-day service is available in most situations, so you know the service you are getting is quality and thorough.
Case Studies and Reviews
Researching testimonials and case studies from individuals who have utilized legal plans proves to be a definitive way of evaluating the general reproducibility of the positive feedback and accounts found in both the surveys and focus groups. Finding this information to be less than centrally available, a few cases studies were found from notable sources, while testimonials were gathered largely from published articles in mainstream periodicals and press releases from plan providers.
Two studies stand out: these were provided by well-respected institutions, the American Bar Association and The Conference Board, representing two divergent perspectives on the question, "Are legal plans worth it?" In ABA’s publication, Legal Referral Services: Fact Sheet 15 (December 2000), it was concluded (findings): "Membership in a legal referral plan can ease access to legal help," 87% of members responding to a survey stated that they had received free or reduced-fee legal assistance; "Most members feel that the value of membership is worth the cost," 83% of members feel that their plan benefits outweigh costs, however, "Differences in perception of value across plan members," the extent to which members feel that plan benefits exceed membership costs may vary among members.
Using an American Bar Association Legal Access Program – five years post-enrollment (2001), The Conference Board’s study of plan users, Perceptions of Value and Quality of Legal Service Plans (2001), concluded (highlights): "Issues in which legal service plan members used their plans include: consumer matters, traffic accidents or tickets, wills, securities fraud, tax questions, personal injury, claims against sellers, domestic relations and credit problems; satisfaction with legal service plans are high," over 93% rate their plan as good or excellent; "Perceptions of benefits exceed costs," 84% considered their investment in a plan to be worthwhile, while findings also indicate "Possible Concerns:" "Raising members’ awareness may help. Members participated sporadically in wellness campaigns."
The American Bar Association found that the average age of a legal plan user is 38 years old and that 55% of legal plan users are married. The top three sources for locating a legal plan are lawyers (20% of users), financial institutions (17%), and corporations (13%). Corporate plans are the most likely to charge a monthly fee (65% vs. 59% among insurance company-sponsored plans and 48% among bank-sponsored plans).
In a study on "Legal Service Plans for Individuals and Families," published by the National Consumer Law Center in 2015, the following claims were gathered from the last decade: "80% of consumers who visit a lawyer for estate planning use a lawyer referred by a legal plan and 75% of legal plan members use their legal plan lawyer for an estate plan;" "43% of legal plan members use a legal plan lawyer for consumer problems;" "48% of plan members use a legal plan lawyer for some problem outside that scope."
A not altogether distasteful anecdote, published in an article by Steven A. Nanda titled "Legal Plans: Not Just For the Rich," in The American Bar Association’s Family Advocate, Spring 2010, exemplifies experience that resonates with literature in this industry, but that can only be categorized among unforeseen complicated legal surroundings: "I am in the middle of a nasty divorce…that my soon-to-be ex-wife filed against me. She’s refused to support our family since she left me. I’ve had to move into my parents home to save money. I had high hopes, regarding the outcome of the divorce, that have since been crushed by the realities of the divorce proceedings…her attorney has completely blindsided me. Having become dissatisfied with the lawyer who had represented me…contained in my handbook is a pamphlet, describing recently acquired legal plan member benefits…an untold amount of information and advice was at my fingertips. …I sorted through all the pamphlets and picked out the lawyer that best suited my needs. I was pleasantly surprised to find out that my new lawyer is cum laude graduate of the University of California School of Law, a Phi Beta Kappa, and a member of the Bar Association of Pennsylvania…my uncontested divorce…now realizing that there is a bright light at the end of the tunnel."
A little research can paint a picture of the past, an important step in moving toward the future. Because the majority of those who use legal plans for personal matters tend not to be lawyers, but rather workers employed by the employer-sponsors of these plans and are to a great extent unhappy, the continued existence of legal plans (and those sponsor organizations) hinges on the ability of plan providers to acquire a new class of users – those who are verifiably better. In order to do so, plan providers would be wise to address the concerns highlighted above and to take into consideration the suggestions offered.
Are Legal Plans Worth It? Conclusion
In this post, I explored the major legal plan companies including LegalShield, Rocket Lawyer, LegalZoom and others, to determine what is included, and if the flat fees are worth it, based on the myriad of user needs. Here is a summary of what I found:
Will a legal plan provide you with the assistance that you need? That depends completely on the issue . For issues outside of the scope of the plan or when special circumstances require different or additional services, the plan will not be beneficial.
However, for younger Americans who are just starting families, starting a business, or want to get their affairs in order, legal plans may be cost effective. Further, since most of these plans are available on a month to month basis, there is no risk of spending money on a service you do not use.