The U.S. government created the Federal Employees’ Group Life Insurance Program (FEGLI) in 1954. Since then, it has steadily grown in terms of numbers of policyholders.
It is the largest group life insurance program across the globe, according to OPM.gov. Over 4 million Federal Employees and retirees, as well as family members, are part of this program.
As a group insurance program, FEGLI provides group term life insurance to Federal Employees. It can help you solve for a variety of life insurance needs.
Those needs may include income protection for dependents, death benefit protection for outstanding household financial obligations, or other important concerns.
Basics of FEGLI
Unless your agency excludes it, you will most likely be able to participate in FEGLI. In fact, most Federal Employees are eligible for it.
Because it is term life insurance, FEGLI doesn’t offer any cash value or policy paid-up value. You have different kinds of coverage:
- Basic life insurance coverage, which automatically covers eligible employees
- Optional life insurance, which offers three choices
The cost of Basic insurance is shared between you and the U.S. government. You are responsible for 2/3 of the cost and the government pays for the other 1/3.
Premium payments are taken from your paychecks unless you opt out of coverage. If you are a Postal Employee, the USPS will help pay for FEGLI. Whether you are a Postal or Federal Employee, your age won’t affect Basic insurance premiums.
While Basic insurance is automatic, you must specifically choose Optional insurance coverage. The cost will be based on your age under Optional insurance. You are also responsible for 100% of the costs of Optional life insurance coverage.
Lower Threshold for Program Participation
A nice feature of FEGLI is it has a lower threshold for participation than many “routine” life insurance policies do. Federal Employees may be eligible without a medical examination or going through other eligibility limits.
If you determine that you need more than Basic insurance coverage, it’s prudent to be mindful of what different Optional insurance choices entail.
What are Coverage Options?
In a nutshell, FEGLI coverage options can be boiled down to:
- 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 gives 1-5 times of your salary more of life coverage
- Option C-Family insurance, which comes out to 1-5 multiples on lives of eligible family members.
Option C-Family insurance coverage is a bit more complex. Under it, each multiple equals $5,000 of coverage on a spouse and $2,500 of coverage on each eligible individual child.
What Do Premiums Involve?
Premiums with FEGLI rise when a Federal Employee enters a new age bracket. Age brackets consist of staggered 5-year periods. In other words, someone who is 30 will be in a lower age bracket. Then they will get “bumped up” into a new bracket upon reaching 35.
The timeline of when Federal Employees are 50-60 years old is when premiums may skyrocket. From ages 50-60, it’s been estimated that FEGLI premiums can increase by 200%, and that is to maintain the same level of protection.
Apart from that, FEGLI coverage is a pure death benefit play. You won’t have any cash value or an ability to use accelerated living benefit riders to potentially pay for long-term care or other care situations.
Since the age 50-60 timeline is when many Federal Employees attain their Minimum Retirement Age, it’s good to consider how your life insurance options may be in conjunction with other parts of your Federal Benefits.
A Federal Benefits-knowledgeable Educator can help you with understanding your options. They can also assist you with understanding how the benefits of your life insurance coverage may help your loved ones in the future.
Need help understanding your benefits options or optimizing the rest of your Federal Benefits? We are here to help. Contact us or request a complimentary CABS Report (Comprehensive Annual Benefits Summary Report) to have more clarity about what your benefits can do for you.