Lawyers are expensive – there are no two ways about it. Getting good representation can cost you a pretty good chunk of change and is necessary if you want to fight a lawsuit from an unhappy client, injured subcontractor or feel the need to bring a case to court. Legal expense insurance, also known as legal protection insurance, is a way to make sure funds are available for a lawyer when – not necessarily if – you need one.
The Benefits of Legal Expense Insurance
No one expects to have to go to court over a matter, but it happens more often than we like. If a problem can’t be worked out with a client, subcontractor or vendor, you may find yourself dealing with legal action. And while you can certainly just pay legal fees yourself, if all of your cash flow is tied up in your business, it may not be feasible to hire a lawyer or hire the lawyer you need to make the odds favorable to your case. Legal insurance, legal protection insurance or a prepaid legal plan means that those funds are there, accumulating and set aside for that nerve-wracking day when you need them.
How Legal Expense Insurance Works
Legal protection insurance is a bit like health insurance, in a way. You’re buying a plan or policy to protect against issues that don’t already exist. For example, if you’re currently in the middle of a lawsuit with a vendor who delivered subpar building materials, that case might be excluded from your plan or you may be out of luck trying to purchase legal expense insurance until that case is settled.
This type of insurance truly is for the unexpected things that contracting sometimes throws at you. Say, for example, a worker slips and falls on the job site, but they were drunk. They might threaten to take you to court for workman’s comp, but you know you can easily fight it with proof of their own negligence. If you purchased legal protection insurance prior to that, you’d have access to legal representation and coverage for the plan. If you rush out to buy insurance after that claim is filed, well, you might be out of luck.
Most plans don’t have deductibles or copayments. You’ll have your choice, generally, of in-network lawyers and service providers and may get a discount if you have to go out of network to find a lawyer who specializes in your unique needs for a particular case. In those cases, many insurers ask that you pay your lawyer out of pocket and file for personal reimbursement.
How Much Does it Cost?
Legal expense insurance is affordable if you factor it in as the price of doing business. You can expect to pay anywhere from $15 to a couple hundred dollars a month, depending on your needs and the insurance provider – a fact that makes some contractors feel their money is better filed in a general legal fund to save for those odd occasions they may need to go to court. As with all insurance types, it pays to shop around and compare rates and see what your peers and competitors are using – if anything.
Do I Need Legal Expense Insurance?
It’s truly up to you as to whether you choose to purchase legal protection insurance or buy into a prepaid legal plan. But as any contractor can tell you, there will be one day – maybe not soon, but at some point – where you end up at odds with one of the many people you work with or for on a regular basis. And in those cases, it pays to have easy, quick access to quality legal representation without the barrier of pulling together funds or finding a lawyer you trust.