The Federal Employees’ Group Life Insurance Program (FEGLI) is the one of the longest-lasting employee benefit programs for U.S. Government employees. It was established in 1954. Since then, millions of people have benefited from its coverage, both in career years and in retirement.
According to the Office of Personnel Management, FEGLI is also the largest group life insurance program on the planet. More than four million federal employees, retirees, and employee family members participate in FEGLI.
Since it’s a group insurance program, FEGLI offers group term life insurance to you and other federal employees. It can be used to cover a wide variety of life insurance needs. Those financial situations include providing income protection for dependents, helping cover household debt or other household needs with death benefit protection, and more.
As a U.S. Government employee, you are probably eligible to participate in FEGLI. In fact, most Federal Employees are eligible for it, unless their employing agency excludes them from it.
FEGLI equips you with term insurance coverage. Because of that, your life insurance policy won’t have any cash value (or policy paid-up value). There are a few kinds of coverage:
- Basic life insurance coverage, which is automatically extended to eligible U.S. Government employees, and
- Optional life insurance, which offers three options
You and the U.S. Government share in cost of Basic insurance. You will pay for one-third of the cost. The federal government is responsible for the other third. The premium payments are drawn from your paychecks.
You will have premium payments taken from your pay unless you opt out of coverage. Should you be employed as a Postal employee, the USPS will assist you in payments to FEGLI. What’s more, your age doesn’t impact your Basic insurance premiums, no matter whether you work for the Postal Service or another U.S. Government agency.
Unlike Basic insurance coverage, which is automatic, you must make a specific decision to opt for Optional insurance coverage. Under Optional insurance, your age is relevant as the cost is based on it. You are also on the hook for all of the costs of Optional life insurance coverage.
Lower Threshold for Program Participation
When you think of life insurance coverage, medical examinations and other unpleasant things may come to mind. But this isn’t necessarily the case with your FEGLI coverage. One great benefit of FEGLI is its lower threshold for participation than many other “routine” life insurance programs require. You might be eligible for FEGLI life coverage without having to go through a medical exam or dealing with other eligibility limits.
What if you decide that you need more than Basic insurance coverage? Then it’s good to know what your Optional insurance choices involve.
What Are Your FEGLI Coverage Options?
At a high level, your coverage options under FEGLI include:
- Basic life insurance, which covers up to your annual pay, rounded to the nearest whole $1,000 plus $2,000.
- Option A-Standard insurance, which provides $10,000 more of life coverage on top of Basic coverage.
- Option B-Additional insurance, which comes out to 1-5 times of your salary more of life coverage.
- Option C-Family insurance, which provides 1-5 multiples on lives of eligible family members.
Coverage with Option C-Family insurance can be a bit more involved. In that case, each multiple comes out to $5,000 of coverage on a spouse and $2,500 of coverage on each eligible individual child.
What Happens to Your FEGLI Premiums Over Time?
FEGLI premiums increase when a federal employee goes into a new age bracket. Age brackets are made up of staggered 5-year periods. For instance, someone who is 30 will be in a certain, lower age bracket. Then once they turn 35, they will be moved to a new age bracket.
The time-frame of when federal employees reach 50 to 60 years old is typically when many see their premiums greatly increase. It’s been estimated that at this point, FEGLI premiums can go up by as much as 200%. What’s more, you will be paying those premiums to keep the same level of protection as before.
You might recall that we said earlier that FEGLI insurance doesn’t have any cash value. From that standpoint, your FEGLI coverage is a play solely for death benefit protection. In other words, your life insurance coverage won’t have a cash value, which could be a source of money for you. Nor are you able to leverage accelerated living benefit riders to possibly cover certain financially demanding situations, such as long-term care needs.
Some Final Thoughts on FEGLI
The time window of ages 50-60 is when thousands of federal employees reach their minimum retirement age. Because of that, it’s prudent to think about how your life insurance coverage options might work and coordinate with your other federal employee benefits.
A federal employee benefits-knowledgeable counselor can assist you with exploring these options, understanding different pros and cons, and determining what can make sense for your situation. They can also be a helpful guide in you envisioning how your life insurance coverage may benefit your loved ones in the future (and what other options can do).
Are you ready for some personal guidance in understanding your benefits? What about making well-informed choices for your financial future — and the financial well-being of your family? We are here to assist you.
Contact us or request a personal federal benefits analysis and retirement gap report so you can have more clarity about how your benefits can work for you.