As anyone who has ever binged a Law & Order marathon knows, legal problems happen. A lot. It’s an unfortunate reality, and anyone who has been involved in a lawsuit in the past knows that hiring an attorney can be expensive.
The prohibitive cost is one reason many people don’t get the help they need and deserve. Fortunately, you can protect yourself from high costs incurred in unforeseen legal matters by purchasing legal insurance.
So how does legal insurance work? And is legal insurance a good idea?
Whatever questions you may have on the subject, this article will provide the answers you’re looking for and steer you in the right direction. Let’s get started!
What is legal insurance?
Legal insurance is a form of coverage designed to help folks access and pay for legal advice. It doesn’t matter if it’s the policyholder filing a claim against another party or vice versa.
The phrase legal insurance is used interchangeably with legal protection insurance (LPI) and legal expenses insurance (LEI).
What costs does legal insurance cover?
Typically, the legal costs covered include:
- Attorney fees.
- Court reporter’s expenses.
- Translation costs.
- Expert fees.
- Witness fees.
You may not owe anything out of pocket for these covered services. However, unlike other insurance plans, LPI does not cover any compensation a policyholder may be ordered to pay.
Are all policies made the same?
The specifics of coverage differ from policy to policy. Generally, though, stand-alone legal insurance products tend to cover a greater extent and scope than policies sold as part of an insurance package.
For example, an add-on cover may take care of the hourly fees strictly associated with the trial but exclude hours spent preparing for the same. Since the preparation part is time-consuming, you might incur significant out-of-pocket expenses.
Some employers provide personal legal insurance to their workers as an optional benefit. The available coverage depends on what your employer decides to offer.
In case the employer does not provide comprehensive insurance coverage, you may want to buy an individual plan customized to your unique needs and requirements.
Is legal insurance worth it?
If you’re wondering whether buying legal insurance is a smart move, then you’re not alone. Let’s face it – no one can predict the future. Because of that, you never know when you may get caught up in a lawsuit where you need the services of a lawyer to facilitate your access to law and justice.
Purchasing legal insurance can protect you from unexpected significant legal expenses. If anything arises, you will have peace of mind knowing that the insurance provider has got your back.
What’s also great is that the monthly or annual cost of keeping your legal insurance policy active is generally pretty affordable.
How does a legal insurance plan work?
Contact your insurer to get in touch with a network attorney
When you have an active insurance plan, you can use the assigned toll-free number on your membership card or go online to get in touch with an intake specialist. They will then connect you with a local network attorney that specializes in legal issues affecting you.
Using a network attorney means you won’t pay legal fees as long as the plan fully covers the issues in question. A policyholder may also get discounted rates on non-covered legal services.
Hire a lawyer outside your network if needed
In some cases, you may have no other option but to hire a lawyer outside the network.
With an out-of-network attorney, you’re likely to pay upfront for the services. The good news is that the money spent here is recoverable, as you are allowed to seek reimbursement from the insurance provider.
However, keep in mind that insurers usually don’t pay out-of-network attorneys more than what in-network attorneys receive. If you exceed the set plan limit, then the difference will be an out-of-pocket expense.
Therefore, before working with an out-of-network attorney, it’s imperative to understand the maximum amount your insurance can cover in any legal matter.
What legal insurance is good for
Legal insurance can cover you against a wide range of legal issues that may come up in different stages of your life. This type of protection is ideal in any scenario where you may need advice about a legal problem, drafting a legal document, out-of-court or in-court legal representation.
Here are some of the common scenarios where legal insurance can be beneficial:
When you buy or sell property, there are always risks involved. Suppose the property exchange does not proceed as expected. In that case, you don’t have to worry about the expenses of bringing legal action against the other party.
If you plan to start a family and need to draft a prenuptial agreement, LPI can cover the lawyer fees for creating the legally binding document. This agreement usually lists the properties and debts of each party. It also specifies the property rights of each person after you’re legally married.
A will sets forth your wishes regarding the property distribution and care of minors after you are gone. While you don’t need a lawyer to write a will, there are some technical requirements that you must fulfill. In other words, you may need professional advice to ensure everything turns out just right.
Legal insurance can cover the costs of setting up a trust to manage and protect your assets or assets until the child reaches the age you specify to receive his or her inheritance.
When you have an LPI plan, it’s easy to find a lawyer to present you in cases involving misdemeanor or infraction charges without worrying about the cost.
A legal expenses insurance policy can pay fees for disputes involving acts that damage your home. For example, a neighbor’s landscaping project or alterations can cause water to run down to your property, leading to massive damage.
Unfair dismissal or discrimination at work
With LPI, you will have access to a lawyer whenever you need them to fight for your employment rights.
Legal insurance can help with disputes against faulty goods or services, especially regarding warranties, contracts, and debt collection.
When filing for bankruptcy, it’s advisable to seek advice from a qualified attorney. Legal insurance can reduce your debt in case things take that route.
Divorce can be expensive, whether it’s contested or uncontested. Legal protection insurance can take the burden off your shoulder when you’ve decided to go separate ways.
Identity theft and fraud
Seniors are at risk of becoming victims of different scams and frauds that usually involve money and property. When the sky-high legal fees are not an issue, the seniors can seek justice quickly before scammers cover their tracks.
A quick reminder that these are just examples, not an exhaustive list of areas covered by legal insurance. Also, keep in mind that insurance companies may have specific exclusions or limitations (I will talk about this shortly). When buying a legal insurance cover, make sure you understand every little detail of your policy.
What legal insurance isn’t good for
While the specifics of coverage vary, there are things legal insurance cannot help with.
Legal expenses of unexpected events
First off, this type of insurance is typically meant to cover the legal costs of unexpected events. In that sense, it essentially won’t protect you against issues that have already started before purchasing the policy.
Legal expenses resulting from criminal charges brought against you
Legal insurance won’t pay the costs that involve criminal activities filed against you. Also, suppose the insurer believes the reasonable likelihood of your claim’s success falls below the accepted threshold. In that case, they might not act on your behalf. The same applies to frivolous claims.
Suppose you bought personal legal insurance and hope to get advice from an attorney in business matters. In that case, you may have to dip in your pocket for such services. The insurance is also not good for issues involving workers’ compensation or unemployment claims.
Would liability insurance be a better buy if professional liability is the concern?
As I mentioned earlier, legal protection insurance is designed to make legal services more affordable. It’s strictly about the fees associated with getting legal advice and justice. So, what happens if you’re found liable for the damages in the dispute resolution process?
If a party files negligence or other claims against you and wins, you will be held responsible for their compensation. Having a professional liability insurance (PLI) cover could be a lifesaver for professionals, such as architects, accountants, physicians, and engineers.
PLI plans offer more protection than general liability insurance policies. For example, typical PLI policies will cover the losses arising from claims of error, negligence, misrepresentation, omission, etc. The general coverage usually won’t cover such claims.
Like with any other insurance plan, there are limitations. Generally, a PLI cover cannot protect you against claims involving criminal or intentional acts.
Does an insurer pick a network attorney for policyholders?
No, when you get in touch with an intake specialist, they will provide a list of network attorneys who practice in your area of interest. It’s up to you to review the lawyers’ profile and then decide the ideal candidate to represent you. Insurance companies often partner with knowledgeable lawyers who are fully licensed and have a good standing with local regulatory agencies. And because of that, you wouldn’t spend a lot of time before finding a match.
Legal insurance limitations
The policy documentation will set out the limits. In this part, we will highlight some of the common limitations that are likely to affect you.
Most plans have waiting periods. After purchasing an insurance plan, you have to ensure it’s active, at least for the specified period, to benefit from it.
It’s a strategy that insurers use to protect themselves against people who may wait until they are caught up in a legal battle to buy coverage.
How often you can use your legal insurance
Other limitations have to do with hours of service and the number of times you can use each type of coverage per calendar quarter or year.
For example, if your child is charged with underage drinking twice a year, an attorney may represent them only once. Your insurance plan won’t cover the expenses for the second legal representation.
Legal insurance can be an affordable solution to getting professional legal help when it matters. As a covered member, you wouldn’t have to spend a significant amount of time looking for an attorney to defend you.
What’s more, the monthly or annual contributions required towards a legal insurance plan will hardly dent your budget. Some providers set the cost as low as $10 per month. It’s easy to understand why having legal insurance is a worthwhile decision, considering the possible benefits you will get.
However, always remember that no two insurance providers are created equal. Therefore, make sure you do your homework before signing up.
Take your time to read through the fine print. If there is anything unclear or vague, seek clarification. It’s imperative to understand the types of services covered and the comprehensiveness of the plan.