What Is Group Legal Insurance?
Group legal insurance is an organization-provided benefit that covers all or a portion of legal service expenses. Typically offered to employees, members or citizens of an organization or employer-owned group, group legal insurance is designed to provide individuals with legal representation for issues arising from matter outside of their usual activities, such as real estate transactions or litigation. Group legal insurance is included in many Employee Benefits Programs and Employee Assistance Programs for organizations who offer access to private attorneys through them . Group legal insurance is offered as part of the general benefits program rather than some isolated benefit, so you may need to review your documentation from your employer carefully to determine if you have group legal insurance. These programs are offered through large insurance carriers or licensed third parties. Many coverage plans provide individuals increased access to legal services and counsel. You will have to pay premiums for these services or pay them off through payroll directly to the provider company. Typically, group legal insurance is only offered for pre-existing or contingency legal matters. Group legal insurance which compensates group legal services does not cover routine legal services such as will preparation.
Advantages of Group Legal Insurance
By capitalizing on their bargaining power, groups can offer financial savings to individual employees. This is particularly true for legal insurance as a relatively low monthly premium can offer employees thousands of dollars in value should they need an attorney for a common legal issue.
If the group plan covers certain common legal issues such as family law, consumer fraud, real estate, estate planning, debt collection, traffic violations and other areas which may be important to employees, the plan can be a great asset to most employees in the group. Employees price-minded for themselves and their families may find that having insurance that covers some or all of these topics may be worth the additional cost per month.
Employers will also benefit by offering this attractive benefit. Employers may gain good will with their employees by offering a benefit that will help them save money. This may also help to boost employee morale and retention. If more than 25 individuals elect the plan, an employer will also benefit financially through the group premium rate that is offered.
Possible Disadvantages or Limitations
Though many individuals find group legal insurance policies to be a helpful addition, there are some downsides to these plans that need to be considered. The primary complaint is that many group legal plans don’t allow an individual to choose a specific lawyer and/or that it will be too difficult to locate a provider. Although many legal insurance policies feature a tiered system of attorneys, which means you can request an appointment with an attorney at a certain tier and receive services at a reduced cost when you visit one of the higher tier providers, all group legal insurance policies we examined required that the insured go to an attorney that was on a list provided and not an attorney of their choosing.
Another potential downside of the group legal insurance plan is having too many exclusions for the policies. While most legal insurance policies do feature exclusions, since legal insurance policies are an added benefit to an employee’s current plan, they can be used in addition to the policy you already have so while your group legal insurance may not cover your divorce because it wasn’t filed in your home state, your personal policy might.
Family and divorce mediation may not be covered by some group legal plans – As outlined above, most legal insurance policies contain exclusions and that applies to mediation as well. Attempting to mediate with your ex-spouse doesn’t seem like it should matter to the group legal policy holder, but on occasion, we’ve seen mediators require an arbitrary up front fee in order to mediate.
No coverage for service of process. If you’re attempting to divide assets with your ex-spouse, you might find that you need to have them served in order to obtain a default judgment; this means that you will not only need to pay to have your spouse served, but you will also need to seek out a process server and get them appointed to your particular case.
Cost Compared to Individual Legal Services
The cost of group legal insurance is attractive when observed in small amounts paid monthly. However, it can be difficult to determine how this expense compares to the fees charged by attorneys on a per-case basis. With relatively low premiums, there are a variety of situations in which group legal insurance becomes the more economical choice. Understanding these scenarios and how they compare to out-of-pocket lawyers’ fees is essential to deciding whether group legal insurance is right for you.
Put simply, sometimes the monthly cost of being in a group legal insurance plan costs less than retaining an attorney for exactly what legal services you need. For example, as discussed above, the average premium for a group legal insurance plan in California is about $12 a month. But what would the cost of legal services be if you needed to hire an attorney to do all the services provided by a group legal insurance plan? In a Northern California survey of current lawyer rates, fees for estate planning services averaged $1,256 per client in 2014. This cost included the drafting of wills, powers of attorney and declarations, reviewing existing estate plans, and the storage of important documents.
On the other hand, sometimes group legal insurance does not provide economic benefits because a legal plan may only cover some of your needs. For example, if you are in a car accident there are a number of ways to pursue a claim against the other driver, including filing a claim with the other party’s insurance, filing a lawsuit, or pursuing a claim for uninsured motorist coverage through your own auto insurer. Despite the availability of your legal plan to file a lawsuit, some insurers who are partnered with legal insurance plans will allow you to collect under the uninsured motorist provisions of your own policy. However, if you do not have a policy with the insurer associated with the group legal insurance plan, the only way to pursue claims against the other driver would be through private counsel.
Who Might Need Group Legal Insurance
The individuals who may benefit the most from group legal insurance can vary widely, as this type of program provides different advantages to different people. Some may be looking to save costs on common legal needs like wills or home closings, while others may make use of unlimited hours with attorneys for potential employment disputes. Here are some groups of people who may find a group legal insurance policy to be a good investment:
- Employees of large corporations and government agencies may benefit from group legal insurance. Businesses that employ a high number of individuals sometimes offer group legal insurance plans to help maintain high levels of employee satisfaction and decrease overall turnover. Often, these group policies are provided at a discounted cost compared to what employees might otherwise pay to purchase an individual policy.
- Individuals who are frequently involved in buying or selling property or changing addresses may benefit from group legal plans. Real estate transactions often involve considerable closing costs , and the use of a plan that helps to reimburse consumers for attorney fees incurred in any involved closing may reduce the overall cost of purchasing or selling a house by decreasing the amount owed out of pocket at closing.
- Individuals who pay annual retainers to lawyers may benefit from group legal insurance. Some group legal plans cover all members for a per-case retainer rather than billing annually in a lump sum.
- Individuals who want cost predictability when it comes to their legal needs may benefit from group legal plans. Unlike an hourly retainer where the cost depends on how many hours an attorney spends on a case, with group legal insurance costs are generally limited to only a few fixed fee amounts.
Assessing a Group Legal Insurance Policy
When evaluating a group legal insurance plan, prospective participants should consider several key factors to make an informed choice. First, examine the coverage provided under the plan. What types of legal issues are covered? Common covered areas include matters such as traffic accidents, real estate transactions, family law, and estate planning. It’s also important to understand whether the policy covers only certain in-network attorneys or allows the option to select an attorney at your own discretion. Some plans will charge a higher deductible or co-payment for out-of-network services, while others will not cover out-of-network services at all.
In addition to examining the coverage and providers, prospective participants should also carefully read the policy terms, including any exclusions or limitations provided in the plan. This is a crucial step in evaluating what an insurance plan will cost as well as what the insurance plan will cover. For example, some group legal insurance plans are limited to handling minor claims, and they will not cover defense in criminal matters or personal injury lawsuits. These types of exclusions can be valuable to know before purchasing the plan.
It’s also worth asking if the plan automatically renews each year and whether cancellation of the plan is an option. For many group legal insurance plans, employees are automatically enrolled when they begin employment, unless they opt out of the plan within a certain amount of time after starting work. Additionally, many group legal plans require employees to remain enrolled for a certain period of time (such as one year) in order to cancel enrollment.
Finally, look beyond the price of the premiums to find how much the plan will actually cost. Coverage for certain providers may require a higher co-payment or deductible. Additionally, if the plan does not cover out-of-network providers, the costs may quickly add up. Finally, the average costs associated with using the plan should be considered when thinking about whether it is worthwhile to enroll in the first place.
Examples and Case Studies
Example 1: The New Papa
A newly married young man, who worked as a clerk in a state government office, had acquired a house during the marriage. He had also previously acquired a car title from a prior marriage that had been financed and that the lender still held a note on. It was in the young man’s name only. The couple enrolled in the Group Legal Insurance plan within a couple of months after getting married. She had also bought a car during the marriage and financed it, putting both names on the title. In less than a year, the man lost his job, the couple could not pay their other debts, and they both were forced to file a bankruptcy petition . The group legal plan attorneys were able to negotiate with their creditors to surrender the car titles in satisfaction of the notes without any negative reports being made to the credit bureaus and without any need to file a formal bankruptcy petition.
Example 2: Home Sweet Home
A couple who had been married for a year and a half had accumulated a small amount of debt that they had incurred prior to the marriage. They were both state employees and had enrolled in the Group Legal Insurance plan shortly after getting married. They decided to purchase a home. The group legal plan attorneys were able to negotiate the couple’s debts so they could purchase a home of their own, rather than a low-end home. In fact, having a home of their own wiped out their debt, making it far more manageable, since no money would be lost monthly to rent.
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