Avoiding Small Business Insurance Scams

Unfortunately, scammers are everywhere. There are some even posing as insurance agents and selling fake insurance policies to business owners. As you seek small business insurance for your company, take into consideration the following advice on how to avoid getting scammed.

As a business owner conscientious of money and how it is spent, you are likely always shopping for a “great deal.” Before you jump on that low premium small business insurance plan you just heard about, find out all the facts about the policy – and the company – first.

Due to the rising small business insurance costs, the window of opportunity has opened for scam artists who prey on small business owners who want to manage expenses.

First red flag: If a small business insurance plan sounds too good to be true, it most likely is. Fake business insurance plans tend to have a number of features in common, such as dramatically lower premiums than the rest of the small business insurance market. If this insurance company in question was a legitimate insurance provider, there is no way, with these super low premiums in comparison to the rest, that they could afford to stay in business. However, since the fake insurance company does not plan on paying claims, they can charge whatever they want in order to lure the victims in.

Red flag number two: “fake” insurance plans tend to accept everyone into the plan, no questions asked. Any legitimate small business insurance provider would generally always be concerned about pre-existing conditions, as well as other facts that can directly affect the claims they may be liable to cover.

Another red flag to be on alert for: An insurance company that does not use the word “insurance” anywhere in its company literature. While this may seem outrageous, some fake insurance providers believe that as long as they avoid references to insurance, this in turn alleviates their obligation to live up to their corporate responsibilities.

In order to ensure your small business insurance provider is legitimate, there are several things you can do. First, do not sign anything until you are 100% confident you are dealing with a financially solid company who has been around for more than four years and who is backed with good ratings. Next, call your state’s Department of Insurance office in order to confirm that the insurance provider in question is legitimate and has a license to do business with the state. Most often, this step alone helps to sift out most scam companies, since fake insurance providers avoid licensing and registration at all costs.

Additionally, it is a wise idea to consult with references of other small businesses that are covered by the small business insurance plan in question. If the insurance provider is not willing to provide you with any references, immediately take this as a sign that you should not do business with them, and that they have something to hide.

If you are having an especially difficult time finding a legitimate small business insurance provider, you can always contact a local or regional small business association. These organizations are most often helpful, as they periodically screen insurance providers for their members.

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