Monday, December 21, 2009

LTCi Doesn't Protect Assets - It Protects Income

It has long been held that long-term care insurance protects assets. It doesn't; it protects income. Clients work a lifetime to accumlate a portfolio which will generate sufficient income in order to maintain their standard of living during retirement. This lifestyle also includes keeping prior financial commitments. It is not unreasonable to assume that retirement income is matched almost dollar for dollar with retirement expenses. Since nothing has been allocated to pay for care, the income, already committed, will have to be reallocated. Where else can the money come from?

In its purest, long-term care insurance is no different than disability insurance; it provides a source of income. In this case, that inmcome can be used to pay for care. This allows the client's retirement income to continue to be used for its intended purpose, supporting lifestyle and keeping financial commitments. Without the product, the family has limited options. They can curtail their lifestyle or liquidate assets. The former may have far reaching consequences. The latter may create serious tax issues and/or shorten the payout of qualified funds and annuities.

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