A Consumer’s Guide to Legal Insurance

Anybody who’s ever hired an attorney can tell you that legal services cost a lot of money, and we all know that life is full of situations when hiring an attorney is more necessity than luxury. But the $300 per hour that you might pay the average attorney in Florida or the least experienced one in the District of Columbia is enough to stretch any budget. Moreover, the need for legal assistance often arises when you least expect it or are financially unprepared for it. One way to avoid this potentially costly situation is securing protection through legal insurance.

What Is Legal Insurance?

When you buy a legal insurance policy, you pay a premium, just like you do for your homeowners, renters or auto insurance. In return, your policy helps you pay for the cost of legal services covered by it. Typical legal insurance policies cover situations such as:

• Drafting a will or developing an estate plan
• Managing an adoption
• Handling a divorce
• Resolving a custody dispute
• Creating a trust
• Transferring property
• Fighting traffic violations
• Working out property, person-to-person or other disputes
• Navigating a bankruptcy

With most legal insurance policies, there is an approved network of attorneys, similar to many health insurance policies’ physician networks. Depending on the policy, it may pay for the full cost of covered legal services or entitle you to negotiated flat fees or discounted hourly rates when you stay in network. Some out-of-network costs may be covered or available for discount, but that also varies by policy.

Who Benefits from Getting Legal Insurance?

Like other types of insurance, legal insurance can protect your finances from being put at significant risk of loss by helping defray the cost of hiring an attorney. That can benefit just about anybody, but it’s especially beneficial for people in the following circumstances:

• Without a current last will and testament: According to Gallup, only 46% of U.S. adults have a will and slightly less, 45%, have a living will, which is another key piece of estate planning that states your preferences for medical treatment if you’re unable to communicate them. Both documents protect you and your family or other designated heirs. Legal insurance may allow you to more affordably draft these documents.
• Want to adopt: If you think that adopting a child is in your future, the total cost can exceed $40,000. Attorney fees are part of that cost, which a legal insurance policy may help cover, depending on the type of adoption and the policy’s specific inclusions and exclusions.
• Plan to buy or sell real property: Many states require that an attorney oversee the sale of residential or investment property that involves a mortgage. The cost of the closing attorney is often split between the buyer and seller, but this is a point that can be negotiated within the purchase agreement, meaning you could be on the hook for more than half or all of this cost. If you do need to cover the cost of a closing attorney, legal insurance can help offset that cost during an overall expensive process.
• Have a teenager: As both the Centers for Disease Control and Prevention (CDC) and the National Highway Traffic Safety Administration (NHTSA) note, teenagers have a tendency to speed. This can lead to traffic violations that come with hefty fines and other penalties that an attorney may be able to get reduced to limit the impact on your finances and your teen’s driving record.

Where Is Legal Insurance Offered?

If you think that legal insurance is right for you, there are several places where you can shop for a policy, including with your insurance broker. Some individual law firms and legal aid services offer it to their clients. In addition, some employers, unions and membership organizations provide it as an employment or membership benefit. If your bank or credit union offers insurance products, that’s another option to consider.

What Questions Should You Ask about a Legal Insurance Policy?

As you shop for legal insurance, here’s a list of key questions to ask about the policies being offered:

• What legal services are covered and which are excluded?
• Are covered items paid in full or do you enjoy a discounted rate or negotiated flat fee?
• Is there a waiting period after a policy’s purchased before coverage begins?
• Can you use the policy for an existing legal issue, which is not typical?
• Is there an attorney network and, if so, what attorneys are included in it? If you go out of network, is anything covered?
• What is the premium amount and deductible?
• Is the policy provider accredited by or have a good rating with the Better Business Bureau?

A few last things to know about legal insurance: It doesn’t cover disputes in small claims court, class-action lawsuits, business legal matters or items covered by another policy, such as your homeowners insurance.

So whatever your case may be (no pun intended), you shouldn’t overlook legal insurance as a cost-effective protection option for you and your loved ones.