02/ 24/ 2005
by Jeffrey Moses
Prepaid legal plans can help manage legal costs by enabling you to access legal assistance through an annual fee, rather than paying on an incident-by-incident basis. Fees are paid annually or monthly, and can run from about $30 a month up to considerably more. Prices vary with the number of free services or discount services provided.
One of the great benefits of prepaid legal plans—or advance-pay legal plans as they are sometimes called—is that participating small businesses are more likely to seek legal help early, rather than put off legal help until problems are more involved, and more costly.
Legal plans for small businesses vary among providers, but normally include the following legal services:
- Guaranteed hourly rates for in-court and out-of-court representation. This helps you to save money and help manage legal costs. Hourly rates for participants in prepaid plans may be 40 to 50 percent lower than what attorneys would normally charge.
- An array of services for which there is no charge, including unlimited phone consultations; legal letters and documents such as collection letters and contracts; and one-half hour or full-hour personal consultations for new legal matters. Most plans place a limit on number of no-charge consulting hours and documents during the year.
- Reduced rates for services such as real estate closings and other real estate matters, wills, tax preparation, representation during tax audits and bankruptcy.
- Reductions in contingency fees for legal matters such as collections, personal injury, credit problems and others.
Legal plans are offered by organizations that include a number of attorneys in a geographic area or by individual attorneys who have organized a number of participating local attorneys. Some of these organizations are national, offering coverage in certain metropolitan areas.
When an enrolled member contacts the organization about legal assistance or representation, he or she is put into contact with one of the participating attorneys. Usually, the same attorney will handle one case from beginning to end. This is an important aspect of prepaid plans, and you should discuss this before joining.
One of the major criticisms of prepaid legal plans is, although they offer unlimited phone consultation with attorneys, many legal matters cannot be handled solely by phone. This means that personal consultations must be scheduled at a reduced but still substantial hourly rate.
Before joining a plan, ask the following questions:
- Who will actually be representing me (names of legal firms and individual attorneys)? What are the attorneys' levels of experience and expertise? Do they have extensive experience representing small businesses? Will I have the choice of attorneys within the plan, and will I be able to change attorneys if I wish? Will the same attorney handle my case from beginning to end?
- What are the plan's fees and what services are offered? What limits are put on services and representation? What services and types of legal representation are not covered?
- Who administers the plan, and can the administrator provide references of previous and current plan participants?
Many of these questions are similar to the ones you’ll ask when hiring any attorney. Don’t be swayed unnecessarily by the idea of saving money – the underlying legal representation must meet your needs first. If it does, then consider the fee structure and other considerations.
