Are Prepaid Legal Service Plans Worth It?

Sorry to be the sandstorm on your beach vacation, but prepaid legal services might not save you much in legal fees. A "prepaid legal service plan" is a type of insurance plan that a number of different companies offer and market through employers, labor unions, credit unions, department stores, credit card companies, and even door-to-door. The theory is that legal services, kind of like nuts and berries, are cheaper when bought in bulk. A relatively low yearly fee, typically a couple of hundred dollars, purports to cover many lawyerly tasks.

But most low-cost plans cover only a few phone consultations, brief office visits, and some uncomplicated services such as preparing a simple will or reviewing basic legal documents. Beyond that, you get a discount for other types of legal services. Unfortunately, the resulting fee often isn't much lower than you could negotiate if you shopped around on your own. The better and more expensive plans completely cover specific legal services, such as divorce, bankruptcy, and drunk driving defense. To avoid obvious conflicts of interest, the best plans don't allow the lawyers who provide consultations under the plan to refer cases to themselves.

When contemplating whether to sign up for such a plan, think about how likely it is that you'll need one of the covered services—and consider how many of these tasks, like writing a will or filing for divorce, you can do on your own with a little help from Nolo or by hiring an attorney. Because most people use a lawyer only a few times in their lives, a prepaid legal service plan might be insurance you can do without. Even if you decide to sign up, don't pay for it until you know exactly what the plan covers and what you'll have to pay on your own. Also, ask whether the plan's consultation lawyers are allowed to recommend their own services. If so, you're at risk of buying into a bait-and-switch scheme.