FEGLI is something that needs to be analyzed in order to find the best life insurance option for federal employees. Below are some important considerations.
If you are over 50 and still have FEGLI you are losing money! That is, of course, unless FEGLI is your only option for life insurance.
For most people, the Federal Employees Group Life Insurance (FEGLI) program prices get out of control as you approach retirement, but there are things you can do about it.
The Basics
Not all parts of FEGLI increase their prices with your age. There are 4 parts of FEGLI and this table summarizes what they cover:
| Type | Coverage Amount |
|---|---|
| Basic | Basic pay rounded up to next $1,000 plus $2,000 |
| Option A | $10,000 |
| Option B | Basic pay rounded up to next $1,000 times chosen multiple (1, 2, 3, 4, or 5) |
| Option C | Spouse: $5,000 per multiple (up to 5 multiples) Children: $2,500 per multiple (up to 5 multiples) |
The pricing for FEGLI Basic is the same for all employees regardless of age.
The pricing for FEGLI parts A, B, and C do go up with age but Option A and C are never that expensive as they don’t cover much. However, Option B can get very expensive as you can get up to 5x your salary worth of coverage.
Nutshell: FEGLI part B is often the troublemaker as the pricing goes up as you age, especially if you have a high multiple of your salary in coverage.
Pricing Across The Board
This chart shows how the pricing works for part B as you age:
| Age Group | Biweekly, per $1,000 | Monthly, per $1,000 |
|---|---|---|
| Under 35 | $0.02 | $0.043 |
| 35–39 | $0.02 | $0.043 |
| 40–44 | $0.03 | $0.065 |
| 45–49 | $0.06 | $0.130 |
| 50–54 | $0.10 | $0.217 |
| 55–59 | $0.18 | $0.390 |
| 60–64 | $0.40 | $0.867 |
| 65–69 | $0.48 | $1.040 |
| 70–74 | $0.86 | $1.863 |
| 75–79 | $1.80 | $3.900 |
| 80 and over | $2.88 | $6.240 |
The pricing is pretty reasonable until you are age 50+ at which point the pricing almost doubles every 5 years!!! So if you are 54 years old and paying $100/paycheck right now then once you hit age 55 you’ll pay almost $200/paycheck for the same coverage.
Alternative Options
As soon as federal employees learn how expensive FEGLI part B can be, they typically do these three things:
- They cut/reduce their FEGLI
- People do this if they realize they don’t need life insurance anymore. Maybe their kids are grown and their big debts are paid off.
- They replace their FEGLI
- If you are in decent health, you can probably replace FEGLI with a cheaper policy in the private sector. Most people get the cheapest term policy they can find that will last for however long they need coverage. But most private sector policies will require a medical exam to get coverage so you won’t qualify if you have serious health conditions.
- They keep their FEGLI
- If you have poor health, you may not qualify for cheaper insurance in the private sector, so if you still need life insurance but have poor health, keeping FEGLI may be the best option for you. FEGLI may be expensive but it is still the best option for some.
Age Should Not Matter
If you are still young and FEGLI part B is still reasonably priced then you can stay on FEGLI for a while, but many young people still move to a well-priced term policy from the private sector so they can lock in a price for a chosen amount of time.
Closing Thoughts
For some, FEGLI part B is the best option while others can save thousands of dollars by switching to a private policy.
It is up to you to shop around to determine the most effective way to protect yourself and your family.
Want to learn more about your federal retirement options? Please contact us to book your complimentary benefits review today!
