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Purchasing business insurance is crucial when running a business anywhere in the world. Unfortunately, countless companies do not understand the importance of insurance and put the task at the end of the to-do list.

Insurance should be one of the first things a company purchases to ensure they are protected. Companies can find a suitable insurance company to help match the right policy to their specific risks.

When working with insurance firms, companies must provide all the details about their company. These details help determine the suitable policies and coverage. At this point, the company must be as honest as possible.

Companies may be tempted to lie about figures or details to help lower the premium. But these lies can be costly when it matters. 

The article will discuss why every company and entrepreneur must be honest when purchasing business insurance. Honestly is the best policy.

Reasons To Be Honest When Purchasing Business Insurance

Accurate Coverage

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One of the main reasons a company should be honest when purchasing business insurance is to receive precise coverage. When a company clearly communicates their business plan, number of employees, past claims, the insurance broker or provider can customise the policies perfect for the firm.

Honest communication creates an accurate and diverse coverage. The insurance providers may also recommend additional policies to help the company protect their property, liability, employees, finances, etc.

Basic coverage may not be enough for every business, and basic coverage may not cover hefty claims, resulting in significant financial loss. The premium may be higher, but it will cover thousands to millions during a claim.

Avoid Legal Issues 

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When a company intentionally provides incorrect data to an insurance company, it is considered fraud. Insurance fraud is not taken lightly and can result in severe fines, void insurance policy, future increased premiums, blocklisted or even jail time.

In Hong Kong, the fraud fine is HKD 200,000, and when an individual (founder) commits insurance fraud, they may face imprisonment for two years. Insurance fraud is very serious, regardless of how small or big the dishonesty is.

Therefore, being honest and providing correct details will prevent legal fraud-related issues. Once again, the lower premium is not worth the criminal stamp, fines and reputation damage.

Financial Protection 

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When faced with business risks and threats, it takes a large amount of funds to resolve or recover from the damage. A company purchases multiple insurance policies to gain the best financial coverage. Insurance is all about being able to recover with the least financial damage.

Financial protection is linked to accurate coverage, which will cover more costs and help the business avoid various financial losses. Honest communication allows the company to claim more and have a suitable high limit.

For example, suppose a company faces an issue valued at HKD 600,000. The related policy may not cover the total amount because the company did not inform the insurance company about the international clients or multiple business locations.

It’s costly enough to run a business, and the proper financial protection gives a company a chance to recover and get stronger post risks.

Trust and Credibility

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Trust between an insurer and a company is crucial when purchasing business insurance. There needs to be a level of trust to help manage and effectively cover potential business risks. Additionally, high credibility makes obtaining the best premiums and policies easier and more straightforward, as well as gaining coverage from various insurance companies.

The best way a company can create trust and creditability is to honestly inform business changes in time, even if the policy is new. For instance, if the company has drastically changed in size over a few months, it should notify the insurance provider to increase its coverage.

In addition, when there is trust, the insurance company will do their best to resolve the claim effectively and benefit the business.

Easy Claim Process

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During or after an unfortunate situation, a company hopes insurance will provide the highest coverage as soon as possible. Trust and honesty make the claim process much easier – the company does not need to hide anything.

When the insurers know everything about the company, less time is spent on investigations and exchange of basic information. Even in an investigation, the company does not need to worry about fraud or dishonesty that could impact the claim.

The process will be smooth when everything is clear. The company can move on from the unforeseen situation as soon as possible.

Dealing with Accidental Errors When Purchasing Business Insurance 

 In some situations, the dishonesty is not intentional but just an error. Filling in insurance forms and providing specific company details can be complex. There is always a chance of mistakes or miscommunication when purchasing business insurance.

Policyholder companies must notice the errors as soon as possible and communicate them to the insurance company. The insurer can make the change and create a revised policy. Quick communication can help avoid any chance of errors being misunderstood as fraud.

One of the best things to do when purchasing business insurance is to seek the help of experts. A company can utilise an insurance broker or intermediary, such as Red Asia Insurance, to review the details. Insurance brokers can make the process easier and point out any potential errors in the details.

Honesty is a crucial part of the insurance industry and is vital when purchasing business insurance to benefit both the policyholder and the insurance company.

 

 

To Learn More about business insurance and get the best coverage for your business, contact Red Asia Insurance.