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What to tell your clients about prepaid legal insurance

What to say when your client asks about using legal insurance to pay fees
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Unless you work at a law firm that is strictly pro bono, your clients are going to have concerns about the fees that you charge them. Every time they receive a bill, they’ll stop thinking about your impressive credentials, your recent victories, and your charitable works. Instead, they’ll be laser-focused on how to reduce their monthly bills.

During the inevitable conversations on this topic, many clients will bring up the idea of obtaining prepaid legal insurance.

As you know, there are many different types of legal insurance plans on the market.

For the layperson, they often seem like a good idea. In the client’s mind, they believe they can pay a relatively modest monthly premium and, in turn, the insurance company will pay your firm’s bills.

You and I both know that’s rarely the case. So, what do you tell a client when they approach you about this type of coverage?

It’s unlikely prepaid insurance will pay for what they need

What many clients don’t understand is that prepaid insurance doesn’t typically include the costs involved with any kind of complex legal matter.

While plans differ in both cost and coverage, many prepaid plans restrict customers to a couple of telephone conversations with attorneys that they don’t know. Moreover, these phone calls are usually reserved for very simple legal matters.

What these companies won’t do is finance your clients’ multi-party litigation, pick up the tab on their off-shore corporate organization, or draft complex commercial leases.

You can help your clients understand this by simply reviewing the policy language that the insurer has provided.

  • Does it allow the client to choose their own attorney?
  • Will it pay for all of the discovery they may need to propound and answer in their lawsuit?
  • Does it cover expert witness costs?

 

Most of the time, the answer to these questions is a resounding “no.” Thus, depending on your clients’ needs, you may have to break the news that these policies just won’t work for them.

Prepaid legal insurance companies are controversial and should be researched

While prepaid legal insurance companies are proficient marketers, they’ve been subject to a myriad of lawsuits for nearly two decades.

While not all of those lawsuits were focused on allegations of fraud, any time an industry is met with investor lawsuits and the like, it may be time to rethink their services.

That said, castigating an entire industry may not lend you credibility in the eyes of your client. It is probably a good tactic to offer to investigate whether the specific insurer your client is considering has been subject to suspicious lawsuits.

Prepaid legal insurance has been linked to multilevel marketing

One of the things that has deterred many people from prepaid legal insurance policies is the fact that some of the early and most well-known offerings in the industry proved to be multilevel marketing companies.

While that in and of itself is not reason to sway your clients away from prepaid legal insurance, it is certainly a factor that should be discussed.

Ask your client whether they want their legal services to be part of a larger side-hustle or whether they just want to put their legal concerns in somebody else’s hands. Most clients prefer the latter.

That said, if your client is a natural hustler, you may have to sit back and watch them sell.

What if your client insists on getting a policy?

Ultimately, many clients are going to opt to get a prepaid legal insurance policy whether you like it or not.

That’s fine. They’re entitled to do that.

Nonetheless, you’ll be doing them a service if you ask them to thoroughly research the reviews these companies have received online.

The truth is, some of these insurers are legitimate, and you need to be prepared to work with their representatives to get your client the best outcome. Also, as you’ll see below, these policies can actually enhance, rather than detract, from your firm’s business model.

Encourage clients to use prepaid legal services for specified services

The flipside of all this is that prepaid legal services can actually work to your firm’s advantage.

Say, for example, that your small, boutique firm practices complex business litigation. Maybe you even have the best firm in the region for that specific practice area, but you don’t have any general practitioners to deal with ancillary client needs.

Your clients (and client representatives) are going to come to you with dozens of legal questions that you’re either not prepared to handle or not interested in handling. They’ll want to know about family law matters, traffic ticket concerns, personal injury complaints, and just about every other type of law that you’ve very carefully decided to avoid in your career.

In those instances, prepaid legal insurance policies might actually help your clients achieve those goals without taxing the highly-specialized legal professionals in your office.

As noted above, it’s almost inevitable that your clients will ask about prepaid legal insurance at some point during your relationship. Just remember to keep an open mind and offer them the most well-researched advice available to you at the time.

Author

  • Jennifer Anderson practiced business litigation in California from 1999 to 2016. When she’s not writing from her floating cabin on the Columbia River, she can be found hiking or kayaking around the Pacific Northwest.