Prepaid Legal Review: Legal insurance that sells itself?
The world over, the US is known as being the penultimate litigious society. It doesn’t matter how ridiculous or insignificant you think your claim is, if you can find a lawyer you have yourself a lawsuit.
Without a lawyer though, you’re not getting anywhere.
Meanwhile, on the other side of the fence, with people all over the country running around filing lawsuits like they’re candy – it’s not all that uncommon these days to find yourself, or your business on the receiving end of a lawsuit.
Frivolous or not, you’re still going to need representation or at the very least, some well-informed (and often costly enough on its own) legal advice.
Aiming to provide Americans with legal advice and make some money on the side with a MLM compensation plan is MLM company PrePaid Legal.
Read on for a full review of the PrePaid Legal business opportunity.
Way back in 1969 by Harland Stonecipher (yes, that’s apparently a real name) was in a car accident.
Frustrated at the lack of legal insurance options available at the time, Stonecipher (photo right) started up ‘The Sportsman’s Motor Club’ in 1972 offering members ‘legal expense reimbursement services‘.
The Sportsman’s Motor Club continued on for 11 years relying on a traditional sales model before adopting a MLM style business model and compensation plan in 1983. PrePaid Legal was born.
Twenty eight years later PrePaid Legal is still running as a MLM company offering prepaid Legal services in 48 US states with the company claiming to have 1.5 million customers and associates nation wide.
PrePaid Legal Products
As the name suggests, PrePaid Legal offers its clients access to various prepaid Legal cover plans.
These plans range from personal to family plans, business plans and even occupational specific plans (eg. commercial drivers).
Each plan covers specific things with a legal representative from paperwork reviews to court time, legal advice, IRS Audit support, court representation, will services and limited motor vehicle legal services.
PrePaid Legal’s plans (including identity theft protection at an additional charge) are only available in the US and due to complexities of laws varying from state to state, might not offer all services in all states. This needs to be checked up on depending on where you live.
PrePaid Legal’s plan sets you back around $26 a month but is slightly cheaper in some states.
There is also business plans available covering legal services that are more business orientated, ranging from about 75$-$125 a month (depending on your business size).
Again, for a more specific overview, you’ll need to check with PrePaid Legal to find out exactly what legal services are available in your state and for what price.
PrePaid Legal Membership Ranks
Within the PrePaid Legal compensation plan are 6 membership ranks starting off at Junior Associate.
Moving up, the other five PrePaid Legal membership options are as follows
Associate – There are two ways to qualify as an Associate, one is what is called a Fast Start Qualify and the other is not time limited.
To Fast Start Qualify, a Junior Associate must make 3 retail sales and either recruit 1 new Junior Associate to the business or make an additional 5 retail sales within 30 days of joining the company.
The other way to qualify as an Associate is to simply make 25 retail sales.
Senior Associate – 3 of your unilevel organisation legs must have an Associate in them, or you can make 50 retail sales.
Manager – 3 of your unilevel organisation legs must have a Senior Associate in them, or you can make 100 retail sales.
Director – 3 of your unilevel organisation legs must have a Manager in them.
Executive Director – 3 of your unilevel organisation legs must have a Director in them and you must have at least 75 retail sales (a maximum of 25 can come from any one leg).
The PrePaid Legal Compensation Plan
The PrePaid Legal compensation plan offers retail commissions upfront with a residual backend that pays you out a percentage of the membership fees paid monthly by those you sign up.
Additionally there’s also a generational residual commission paid out too.
Retail commissions in PrePaid Legal are a little odd in that they’re paid upfront as a yearly commission, on the assumption of course that your customer will maintain their PrePaid Legal membership for a year.
Retail commissions are paid out according to your membership rank and are as follows;
- Junior Associate – $50 (only $25 of your first five sales are paid in advance)
- Associate – $75
- Senior Associate – $100
- Manager – $125
- Director $150
- Executive Director $182.50
Cumulative Override Bonus
The Cumulative Override Bonus pays up to two generations deep and is paid out to the first member in your upline who is at a higher rank then you, each time you recruit someone.
For example, if you are a Director and you recruited a new Junior Associate, the system would look to your upline for the first available senior ranked member. You would earn an override for bringing in a new Junior Associate and your upline would receive an Override Bonus too.
These bonuses are paid out on the same chart as follows;
To work out what your bonus is (or your uplines bonus), simply go to the relevant section of your rank and then either ‘Junior Associate’ if you are recruiting, or the membership rank of the member who recruited if you are the upline.
Using the previous example, being a Director you would earn a $100 override for bringing in a new Junior Associate.
Lets say your next ranked upline was an Executive Director, looking at the chart they’d also make a $32.50 commission (The $32.50 comes from the Executive Director section on the ‘Director’ line).
Note that at the Executive Director level it is possible to extend your membership rank by increasing the number of legs in your unilevel organisation that have Executive Directors in them.
There are 10 additional levels (‘Bronze Executive Director’ up to ‘Platinum 7 Executive Director’) and as you advance each level your Cumulative Override Bonus shrinks but your Retail Commission grows.
At the Executive Director Level, you earn $182.50 as an upfront retail commission and $32.50 in Cumulative Overrides.
At the Platinum 7 Executive Level (the highest) this is then $203.50 in upfront retail commissions and 50 cents in Cumulative Overrides.
Comparing these numbers does equal a negative $11 difference but this made up for by increasing the payout frequency of the Cumulative Override commission.
Instead of being paid out just once as an Executive Director, as you advance past this level you are paid out an additional Cumulative Override for each active Associate between you and the Associate making the sale.
The idea here is that by the time you advance beyond Executive Director, your unilevel organisation will be quite large and the additional Cumulative Overrides will make up the difference lost in the reduction of the payout itself.
The Breakaway Bonus is a commission paid out to Directors and Executive Directors up to seven generations deep.
Where’s a typical commission pays out on the downline, the Breakaway Bonus pays out following the upline.
Starting at the point of sale, a Breakaway point is the first Director or Executive Director found in the upline. The second Breakaway point is the next Director of Executive Director found working up, the third and forth follow on in the same manner until a total of seven qualified Directors or eight Executive Directors are found.
Each of these Breakaway points has a separate corresponding payout value, and they are as follows (Director/Executive Director payout);
- Breakaway 1 (the first upline Director or Executive Director found from the member who makes a sale) – $25/$32.50
- Breakaway 2 – $6/$10
- Breakaway 3 – $5/5$
- Breakaway 4 – $4/$3
- Breakaway 5 – $3/$1
- Breakaway 6 – $2/$1
- Breakaway 7 – $1/50c
- Breakaway 8 (Executive Director payout only) – 50c
Platinum Breakaway Bonus
The Platinum Breakaway Bonus operates in the same manner as the regular Breakaway Bonus, but pays out an additional $1 on 3 Breakaway points following the upline from the point of sale.
Note that the Platinum Breakaway Bonus is only available to Platinum Executive Directors and above.
2nd Year Membership Commissions
Note that the above commissions are only valid for the first year of membership of either Associates or retail customers you bring to PrePaid Legal.
After the first year the same commissions as above are available to you, however the payout rates are determined by what PrePaid Legal call your ‘Persistency Level’
Simply put, your Persistance Level, is a percentage number of the amount of customers you bring into PrePaid Legal who stick with the company for over 12 months.
For example, if out of your first 10 people you either recruited as Associates or sold PrePaid Legal to as retail customers 5 of them continued to pay their membership years beyond their first year, you would have a Persistency Level of 50%.
This would then go up or down accordingly as each 12 month period came up for review on customers or Associates you’d brought to PrePaid Legal.
The more people you have paying membership beyond their first twelve months, the higher your Persistency Level will be.
As an associate yourself, your commission on these members is paid out as follows (depending on your persistency level);
Note that in the above chart, the ‘Platinum Generation’ bonus is the ‘Platinum Breakaway Bonus’ I refer to above in my compensation plan explanation.
$17 Legal Plan Note: The above information is relevant to PrePaid Legal’s $26 legal plan coverage. Additionally PrePaid Legal offers another $17 legal plan which comes with its own compensation plan figures.
The components of the $17 legal plan compensation plan are the same so they can be applied as is to the $17 compensation plan. Note however that the commissions figures are different.
Joining PrePaid Legal
Those wishing to join PrePaid Legal as a Junior Associate are looking at a one time fee of $249.
The biggest challenge I see with the PrePaid Legal business opportunity is the unpredictable nature of legal matters, and uncertainty of covering costs that you might be hit with in the process of engaging said matters.
PrePaid Legal comes across as being sold as something you might need should legal action come your way, or you find yourself in a position to launch it yourself. Kind of the same way medical insurance is sold (‘you probably won’t need it, but just incase…’).
The problem then is that looking at the legal services PrePaid Legal offers, it seems most of them are procedural (capped by the hour, or a certain amount of forms, telephone calls etc.)
You’re being sold car insurance, but in reality only being given roadside assistance. Enough to get you home… but after that (unless you pay extra), you’re on your own.
As such, I get the impression that selling PrePaid Legal to people mightn’t be as easy as it sounds. Surely someone fed up with paying ongoing legal bills would they themselves search for a cheaper alternative?
And if you’re there at the right time… then sure, you might get the sale but far more realistically, like any insurance, you’re going to be attempting to convince your lead they need your service.
Unlike health insurance however, where you know your health is going to fail sooner or later, legal services are definitely a gamble for most people.
And for those it isn’t, those that for one reason or another find themselves in the legal arena consistently, surely they’d be better off retaining the services of a personal lawyer than relying on PrePaid Legal’s mostly casual offerings?
And that’s not a criticism of the company, I mean for $26 or so a month it actually doesn’t sound too bad. What you’re essentially counting on however is the cost of the limited service you’re going to get coming in at less than the cost of specialised legal service to handle a matter as it arises.
When weighing up the cost of PrePaid Legal over the years this could be way over, taking into account of course the ongoing costs after you’ve exhausted your limited PrePaid Legal coverage.
Get over that marketing minefield however and you might just be able to build yourself a profitable home based business.
Compensation plan I don’t see any major problems other than the peculiarity of paying out members an initial upfront yearly commission.
This in itself isn’t so bad but it’s hedged against the risk of the customer (or Associate) cancelling their membership before the 12 month period you’re being paid an advanced commission on.
No doubt from the company’s viewpoint this acts as a strong incentive to keep people paying memberships (hell, they even publicly grade you on this!), but from an Associate’s perspective, the ever looming chargebacks spell potential disaster.
You’re obviously going to spend some of the commissions you earn with PrePaid Legal and if you’re using them to live on, pay bills, send your kids to school or whatever, what happens when people quit and the company demands its money back?
You’ve already spent it so what do you do?
Answer: You go into debt if you can’t cover your losses and then find yourself playing the dangerous game of relying on the PrePaid Legal to get you out of debt… taking the even bigger gamble more people won’t end their subscriptions along the way and drive you even further into debt with commission repayments.
Not a nice situation to be in, but a very real danger with the way the PrePaid Legal compensation plan retail commissions are set up.
That major worry aside, the only thing I think that needs to be mentioned is that while there are recruitment requirements built into the upper end (you can’t become a Director without having recruited 3 Associates) of the compensation plan, they aren’t mandatory (Director level excluded) and there’s plenty of retail commission options.
Additionally to advance beyond the Director level, retail sales are actually tied into the promotion too – meaning you have to sell PrePaid Legal’s service if you want to advance.
Marketing PrePaid Legal isn’t without its challenges but with the right mindset and extensive company history, they’re obviously doing something right.
So long as you pre-plan for commission chargebacks and are aware of the marketing challenges you face (educate yourself thoroughly on the limitations of PrePaid Legal’s provided services), you should have a pretty decent crack with the business.