Are Prepaid Legal Services a Scam?


Authored by H. Clare Callow in Legal
Published on 08-08-2009

Prepaid legal services are a hot topic at the moment, mainly due to the doubtful nature of some of the businesses supplying them. Some prepaid legal companies have added to the bad name of the industry by stinging employees as well as consumers, and some prepaid legal service businesses have been accused of questionable recruiting practices. This has led to accusations of pyramid scams, among other things.

Prepaid legal service businesses have been around on and off since the 1930s. The general idea is for the business to act as an intermediary between professionals and clients, and offer the same kind of service as medical insurance does. The difficulty is that some clients may never need to use the service, and others may need legal representation in a way that the service can’t provide.

Prepaid legal services resemble house or car insurance in many ways. You pay for a service you may never require. The contract you are signing may not cover you for the kind of help you need when you need it. There are also many disgruntled customers willing to complain about them, but a few happy customers too.

The difficulty when deciding whether you want to join a prepaid legal scheme is whether you would be better off paying for such services outright. Prepaid legal services may offer consultations and legal advice on tap, and be helpful when preparing your living will and settling your estate. The problems usually come in when more major legal services are required, such as representation in court. Quite a lot of prepaid legal schemes don’t cover this in their basic plan, but unless you’re running a criminal empire you’re not likely to think that you’ll ever need the extra cover for court services.

Another consideration is the importance of liking your representative when dealing with legal matters. It’s vital to trust, if not actually like, your attorney. Most prepaid legal plans don’t allow you to switch attorneys when you want to, which means that you are stuck with someone you don’t trust to perform an incredibly important task.

If you do decide to join in a prepaid legal service, it’s important to choose carefully. Some prepaid legal service companies are successful enough to sell shares of their stock. However, just as with any service, you shouldn’t be lured into the trap of trusting a company because they are listed on the stock market. The fall and rise of giant companies over the last couple of decades has demonstrated that stocks don’t represent solidity. When choosing a prepaid legal service, it is best to do your research and find out if they have any disgruntled customers. Look for both positive and negative reviews to get a balanced opinion.

Examine your contract carefully before you sign. If you’re unsure of exactly the sort of legal services you’re likely to need, do some more research before you sign.

The danger of using a prepaid legal service is that your needs might be beyond what the service covers. When it comes to legal matters, you can’t really afford to make mistakes. In the end, it might work out better for your budget to hire legal representation as and when you need it.


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