So when a discount health insurance plan comes along you jump on it, only to discover that it provides zero coverage when you file your first claim. You've just become the victim of a fake health insurance plan - a problem that is more common than you might think.

Rising insurance costs have left the door wide open for scam artists who prey on small business owners who want to manage expenses, but still do the right thing for their employees.

These guys can be very slick, and if you're not careful you run the risk of being taken in by their big promises and smooth sales strategy. But if you know what to look for, you can spot a fake insurance plan a mile away.

Red Flags

If a health insurance plan sounds too good to be true, it probably is. Beyond that, fake insurance plans tend to have a number of features in common including dramatically lower premiums than the rest of the insurance market. If they were a legitimate insurance provider, they couldn't afford to stay in business. But since they have no intention of paying on claims, it doesn't matter what they charge.

Similarly, fake insurance plans tend to accept everyone into the plan - no questions asked whereas legitimate providers are typically concerned about pre-existing conditions and other factors that can affect the claims they may be liable to cover.

One more red flag to look for is a company that doesn't use the word "insurance" anywhere in its literature. As silly as it seems, some fake providers believe that the avoidance of references to insurance alleviates their obligation to live up to their responsibilities.

How to Be Sure Your Provider is Legitimate

If you have suspicions about an insurance provider, there are several things you can do to find out whether or not they are truly legitimate.

For starters, don't sign anything until you are 100% confidant you are dealing with someone who is above board.

Next, call the Commissioner of Insurance office for your state and confirm that the provider is legitimate and has a license to do business in the state. This step alone weeds out most pretenders since fake insurance providers avoid licensing and registration procedures like the plague.

As an added security, it's a good idea to check out references of other small businesses that are currently covered by the insurance plan. If the provider is unwilling to provide you with any references, you should take that as a sign that the provider has something to hide.

If you are still having a hard time locating a legitimate provider, you may want to contact a local or regional small business association since these organizations often screen health insurance providers for their members.