In an increasingly complex legal landscape, many individuals find themselves needing legal advice or representation. To meet this need, some employers offer legal insurance as part of their benefits packages. But is legal insurance really worth the expense? This article will delve into what legal insurance covers, its limitations, and the factors you should consider when deciding whether to invest in it.
What Legal Insurance Covers
Legal insurance, also known as prepaid legal plans, are typically priced between $9 and $30 a month. For this fee, you gain access to legal services such as advice, document preparation, and representation in certain circumstances. Covered areas can include wills and trusts, divorce proceedings, traffic violations, consumer protection, child support, and property protection disputes.
These plans operate similarly to health insurance: subscribers have access to a network of service providers who offer discounts on potentially high-cost services. Unlike health insurance, there are no co-payments or deductibles, and some plans even extend coverage to spouses or dependents and offer discounts on non-covered services.
The Limitations of Legal Insurance
As with most insurance policies, the benefits of legal insurance may not be as impressive as they initially seem. Many plans offer what are essentially low-cost services, such as phone consultations or basic document reviews. When it comes to more significant legal issues, like contested divorces or bankruptcy, plans may come with restrictions on the hours of representation or require out-of-pocket costs for services like document filing or expert witness fees.
Many basic plans will not fully cover certain legal services, and in cases of more complex legal matters, the plan may only offer a discount on what could still be expensive representation. It’s also worth considering any other insurance policies you may have, as they might already cover some legal costs. Most plans also have a waiting period, meaning you can’t use your benefits immediately upon subscribing.
Weighing the Pros and Cons: Is Legal Insurance Worth It?
Critics like Dave Ramsey argue that the annual expense of legal insurance may not justify the coverage, pointing out that the average American does not spend the amount that prepaid legal services cost over ten years. Instead, Ramsey recommends having a robust emergency fund to cover any unexpected legal costs, effectively self-insuring against legal expenses.
Estimates suggest that the average American spends about $250 per year on legal costs. While unforeseen legal costs can certainly occur, knowing how much you might typically spend, along with what’s already covered by other insurance policies, will help inform your decision.
At first glance, you might think that buying legal services in bulk like this is a good bet. But when it all boils down to it, the lower-cost plans only cover the basics like a few phone calls and making your will. You can still get access to other legal services, but they basically end up happening at a discounted rate—not for free. So what was the point in paying for those services month after month? Your guess is as good as ours. Looks can be deceiving. And when it comes to prepaid legal services, they’re all dressed up with no place to go on a Saturday night.Dave Ramsey
Ultimately, the value of legal insurance is dependent on your unique circumstances. If you often find yourself needing legal advice or anticipate requiring representation in the near future, legal insurance could provide peace of mind and financial savings. However, for many individuals, building a solid emergency fund may be a more cost-effective solution. When making this decision, consider your specific needs, existing coverage, and potential for legal expenditures. In the world of legal insurance, as in many aspects of life, it’s crucial to read the fine print and know exactly what you’re signing up for.