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Professional Practices and Disability - Financial Records Disclosure

With the exception of an IRS audit, few requests for information are as unpleasant as a letter from the disability insurance company asking for complete financial disclosure.

If the disability insurance payments are based on practice income, in the case of a claim for partial disability or residual disability benefits, the request for financial disclosure does not seem out of order; how else will the disability insurance company determine the correct payment amount? But this isn't usually the case. Where a claim is for total disability, however, it may be that the request for such financial disclosure is both onerous and improper.

Most disability insurance policies sold to professionals contain clear language about the amount of monthly benefits to be paid, with no reference to the financial statements of the individual personally or professionally. So why are the insurance companies asking for documentation of your income, details of your expenses, and more information than the IRS is entitled to?

If you have filed a claim and the insurance company has requested a complete set of your financial records, here are steps you can take to protect yourself:

1 - Find your original disability insurance contract and read it. Locate the section that discusses financial disclosure. This is often governed under a section of the policy called Proof of Loss. If there's language in there you don't understand or that doesn't make sense to you, call an experienced disability insurance law attorney. You may have to provide some records - but it is unlikely that you have to provide everything.

2 - Determine for yourself, or with the assistance of representation, what information is truly appropriate and/or necessary for the insurer to consider your claim properly. Do not permit an insurer to brow beat or intimidate you into disclosing more information than would be appropriate.

3 - If you are required to provide practice information, make sure that your office records are up to date and complete. Check with your CPA, bookkeeping service or comptroller, to ensure that the records are fully compliant with local, state and IRS requirements. If there are any questions regarding tax issues, the insurance company may not care - but some of their own documentation searches could set up a red flag for local, state or federal agencies. Be prepared to back up your methods of record keeping.

if you have questions about financial disclosure, call our office to learn how we can help.

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