The Pros and Cons of Formal vs. Informal Long Term Care

Shawn Plummer

CEO, The Annuity Expert

Regarding long-term care, there are two main options: formal and informal. Both have pros and cons, so how do you know which is right for you? In this guide, we will discuss the critical differences between formal and informal long-term care so that you can decide what is best for you or your loved one.

What is Informal Care?

Unpaid care that family members or friends generally give is known as informal care. However, it has long been the most popular long-term care for the elderly.

Costs seem to play a vital role in giving significant amounts of time each week to informal caregiving and minimizing the use of formal care resources whenever feasible. However, caring for someone can be stressful and lead to health issues.

What Is Formal Care?

A service system is a type of care that includes everyday housekeeping, errands, and preparing and cooking meals for the elderly or disabled person. Paid workers or volunteers may be hired as formal caregivers; these organizations could be for-profit or non-profit.

Several different types of organizations provide formal care. Some examples include:

When no suitable informal caregiver is accessible, formal care is selected only to the degree that a patient’s level of care requires more than the informal caregiver’s capacity or expertise.

Formal Care Examples

Informal Care Vs. Formal Care

Both informal and formal care has advantages and disadvantages, and it is essential to understand their differences to make the right choice.


One of the significant differences between informal and formal care is the cost. Informal care is generally less expensive than formal care, provided by family, friends, or any non-professional caregiver who does not charge a fee. On the other hand, formal care is provided by professionals who charge a fee, which can be expensive.

Time Commitment

Informal care may require more time commitment than formal care as the caregiver is usually a family member or friend. This means the caregiver must balance their personal and professional life while caring for the patient. In contrast, formal caregivers are professionals dedicated to providing care so that they can commit more time to their patients.

Hidden Costs

While informal care is less expensive than formal care, it may have hidden costs. For instance, if the caregiver is a family member, they might have to quit their job or reduce their working hours, which can lead to a loss of income. Additionally, informal caregivers may have to pay out of pocket for the patient’s expenses, such as medication or medical equipment.

Quality of Care

The quality of care is another crucial factor to consider when choosing between informal and formal care. While informal care is provided by family members or friends who have a personal relationship with the patient, it may not be as effective as formal care, which trained professionals provide.


Formal caregivers like nurses and doctors have the expertise and knowledge to provide high-quality care. They are trained to handle various medical conditions and have access to medical equipment and resources unavailable to informal caregivers. In contrast, informal caregivers may lack the knowledge and expertise to provide adequate care.

Emotional Support

Informal caregivers may provide emotional support that formal caregivers may not be able to provide. This is because family members or friends have a personal relationship with the patient, and they may understand their emotional needs better. Additionally, informal caregivers may provide companionship, which can comfort the patient.


Flexibility is another factor that differentiates informal care from formal care. Informal care is generally more flexible than formal care, provided by family members or friends who can adjust their schedules per the patient’s needs.


Family members or friends who provide informal care can adjust their schedules to meet the patient’s needs. This means that they can provide care at any time of the day, even during odd hours. In contrast, formal caregivers usually work according to a fixed schedule, which may not be flexible.

Level of Care

Informal caregivers may be able to provide different levels of care as per the patient’s needs. For instance, they may be able to provide basic care, such as assistance with daily activities, and medical care, such as administering medication. In contrast, formal caregivers usually provide a specific level of care, which may not be customizable.

What Is Formal Care

How Much Does Formal Long-Term Care Cost?

According to Genworth, the 2020 annual median cost for formal long-term care is:

How To Pay For Formal Long-Term Care At A Fraction Of The Cost

A long-term care annuity is a hybrid annuity that is set up to assist in paying for formal long-term care without causing retirement funds to be depleted. To create a tax-free Long-Term Care Insurance benefit, an LTC annuity doubles (200%) or triples (300%) the investment (based on medical records). If there is money in the annuity, it passes along a death benefit to beneficiaries.

A long-term care life insurance policy (LTCi) is another excellent option if you don’t have a lump sum. These policies are designed for long-term care and allow the insured to access the life insurance’s death benefit while alive to pay for LTC costs. In addition, applicants can pay a fixed premium monthly or annually instead of a one-time deposit.

Informal Long Term Care

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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