Legal insurance plans help protect individuals and businesses from the financial burden of certain legal proceedings. But what does legal insurance cover?
Depending on the policy’s specifics, it can cover everything from consultation to court costs. It can also protect from financial loss due to lawsuit settlements or judgments.
However, the specific coverage depends on the insurer and the type of plan.
There are two main types of legal insurance: individual policies offered by private companies, which may have limited coverage or group plans offered through employers, which typically provide a broader range at a lower cost since they involve larger pools of members.
Hence, before purchasing a policy, it is essential to understand what it covers to ensure it suits the needs.
Group Legal Plan Coverage
From businesses to country clubs, offering legal coverage is a great way to provide peace of mind for the staff.
Group legal plans work the same way as health insurance covers medical expenses. Members pay affordable monthly fees, and the insurance provider covers the attorney costs in case of legal issues.
Legal Coverage Through an Employer
Much like health insurance, receiving legal coverage through an employer as a benefit is quite common.
Group legal plan coverage is an attractive option for employers who wish to provide their employees with access to quality legal services. Businesses can purchase coverage for all workers at once with a group plan.
This often leads to lower premiums than if each employee was required to pay for individual policies.
Most providers of group legal coverage don’t require deductibles and co-pays. Instead, all workers pay a monthly fee.
Group legal plans are also beneficial because they provide employees with the same level of coverage, regardless of personal income or employment status.
Employees’ Access to Legal Services & Its Impact on Businesses
Providing employees access to benefits such as legal services is instrumental. More and more workers today choose legal insurance as a voluntary benefit.
This is especially common amongst younger generations.
In fact, Millennials (41%) are more likely to purchase legal insurance than older generations (30%), according to an ARAG-commissioned study.
The impact that group legal plans have on businesses is multifaceted.
From a financial standpoint, these plans reduce costs for employers associated with litigation and other expenses of legal disputes.
On an operational level, providing access to experienced attorneys helps ensure compliance with applicable state and federal laws. Thus, any potential violations can be addressed quickly before they become costly problems down the line.
Finally, offering this benefit may increase staff members’ morale and help attract new talent. Providing legal protection shows current and potential workers that the company values them enough to invest in their future mental and financial well-being.
What Does Legal Insurance Cover
What legal insurance covers varies from plan to plan. Each insurance company makes up its policy, but examples of what might be covered are shown below.
What does legal insurance cover for individuals? | |
Consumer protection | Auto repair |
| Buying or selling a car |
| Home improvement |
| Personal property disputes |
| Consumer protection for goods and services |
| Consumer fraud |
| False advertising |
| Unfair business practices |
Personal protection | |
| |
Debt-related matters | Debt collection |
| Garnishments |
| Student loan debt |
| Bankruptcy |
Family | Name change |
| |
| Adoption |
| Child fostering |
| Marriage |
| Prenuptial agreements |
| Separation |
| Divorce |
| Child support |
| Guardianship |
| Child custody |
| Single parent matters |
Wills and estate planning | Wills |
| Testaments |
| Trusts |
| Asset distribution |
| Power of attorney |
Real estate and home ownership | Contractor issues |
| Neighbor disputes |
| Buying a home |
| Selling a home |
| Deeds |
| Foreclosure |
| Land disputes |
Tenants’ services | Lease agreements |
| Security deposit |
| Landlord disputes |
| Eviction |
Driving matters | Traffic tickets |
| License suspension |
Tax issues | IRS tax audit |
| IRS tax collection |
| Tax advice |
Criminal matters regarding minors | Juvenile |
| Parental responsibility |
Elderly care | Medicare/Medicaid |
| Nursing home agreements |
| Hospital bills |
Business Legal Insurance
Nevertheless, it is not only individuals who might need legal insurance at some point. Businesses may also face situations where they can benefit from being legally protected.
According to a study by Kingston University, “The Legal Needs of Small Business,” companies report ten legal issues yearly on average.
Frequently, employers’ primary concern asks the question: does business insurance cover legal fees? While the answer is yes, coverage doesn’t apply to all claims. The following are some examples of where business insurance can be helpful.
What does legal insurance cover for businesses? | |
Employment | Contract disputes |
| Breach of employment laws |
Employment restriction covenants | Employee dispute |
| Dispute with another party |
Tax disputes | Tax inquiry by HMRC |
| Dispute about VAT |
Property | Property damage |
| Public or private nuisance or trespass |
| Recovery or repossession of property from an (ex-)employee |
Legal defense | An investigation that can lead to prosecution |
| Criminal proceedings |
Compliance and regulation | Complaint against the terms of a Statutory Notice issued against the business |
| Defense of a civil action brought against one of the employees |
| Representation during a professional or regulatory body investigation |
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Statutory license appeal |
|
Loss of earnings |
|
Personal injury |
|
Executive suite | HMRC’s investigation into the executive's private tax matters |
| Traffic offense resulting from personal, social, or domestic driving |
| A claim resulting from theft of personal information. |
| Disagreement that needs to be resolved through mediation |
Contract and debt recovery | Purchase of goods and services |
| Hire of services |
| Lease of goods and services |
| Servicing and maintenance of goods |
| Sale or provision of goods or services |
What Isn’t Covered by Legal Insurance?
While there are many areas that a legal protection plan covers, there are certain matters that it isn’t suitable for.
First off, legal insurance doesn’t cover expenses for unexpected events, which means that it doesn’t offer protection for cases that started before purchasing the policy.
Additionally, these policies don’t provide coverage for criminal matters that would lead to a trial in court. Likewise, they will not cover attorney fees involving criminal charges filed against a person.
Moreover, most legal insurance policies will not cover expenses associated with filing a patent application or obtaining copyright protection for creative works. Similarly, they may not include representation in trademark disputes unless expressly stated otherwise within the policy terms.
Often times, people ask: does legal insurance cover divorce?
Some plans provide only advice or discounts on divorce matters. However, an area often excluded is divorce-related mediation and arbitration services used to resolve disagreements between spouses without needing costly litigation.
Regarding international law cases, there are restrictions on legal insurance plans when dealing with matters outside the US. Many countries have different rules regarding how certain disputes should be handled, particularly ones involving foreign governments or companies operating overseas.
Finally, legal plans can’t offer services regarding business matters if an individual purchases personal insurance. If they need help with advice on business concerns, they will have to pay the expenses themselves.
Improving Legal Insurance Plan Access in the Future
While it is gaining ground, legal insurance still needs to become more widespread. Many people question what does legal insurance cover – or are unfamiliar that it even exists. Frequently, they confuse it with discounted legal services, which are often part of employee assistance plans (EAPs).
Yet, legal issues cause as much stress as financial matters do, but legal stressors are reported less than financial ones. ARAG’s study “How Legal & Financial Stress Impacts Employee Wellness” found that there are five significant stressors among workers when it comes to legal problems:
- 71% don’t know where to seek help or how to start
- 69% are worried about the time commitment necessary to deal with the issues
- 68% don’t understand their options
- 67% are concerned about the costs associated with these matters
- 61% have trouble finding a lawyer to help
The good news is that legal expenses insurance can help reduce these stressors. In fact, the same study found that 90% of plan members report feeling less anxious when it comes to legal issues.
When employees receive the legal support they need, it makes them more engaged in their work and more productive.
Hence, companies should increase awareness of the benefits of legal insurance and offer more widespread access to it. However, it’s not only employers who should promote legal plans.
Providers also play a crucial role in making prepaid legal plans more accessible in the future.
How Can Insurance Companies Increase Plan Access?
One way to achieve this is by expanding existing plans and making them available to more people. Reducing minimum eligibility requirements or providing additional coverage options that may fit more unique circumstances can help achieve this.
Additionally, developing new partnerships with providers who specialize in areas of law not typically covered by current policies (such as immigration law) would provide a more extensive range of services at an affordable price point while simultaneously allowing insurees to obtain legal advice from professionals who have expertise in these specific areas.
Lastly, offering discounts for specific populations, such as students or seniors, would make these programs even more accessible. This could potentially lead to increased usage and allow people from all backgrounds to take advantage without breaking their budget each time they need counseling to navigate complex matters related to personal affairs or business operations.
Conclusion
There is no one strict answer to what does legal insurance cover. Ultimately, it all depends on the provider and the policies they offer.
Therefore, as much as it is essential to understand how legal insurance works, it is also vital to comprehend what it covers. Only then can an individual or a business choose the plant most suitable for their needs.
