Understanding Your Federal Employee Benefits | Federal Employees Group Life Insurance (FEGLI)

Part 4 of a 6 Part Series

When it comes to ensuring financial security for your loved ones, having a comprehensive life insurance policy is absolutely critical. For federal employees, the Federal Employees Group Life Insurance (FEGLI) program may offer a valuable solution…..while they are employed. Designed to provide federal employees and their families with affordable and accessible life insurance coverage, FEGLI plays a vital role in providing death benefits to loved ones. In this blog post, we'll delve into the details of FEGLI, its benefits, coverage options, and considerations to help you make an informed decision about your life insurance needs.

What is FEGLI?

The Federal Employees Group Life Insurance (FEGLI) is a group life insurance program offered by the U.S. government to its employees. The Office of Personnel Management (OPM) has an exclusive contract with Metropolitan Life Insurance Company to provide group term life insurance. FEGLI provides eligible federal employees and their families with life insurance coverage. The program was established to ensure that federal employees have access to life insurance options to protect their loved ones financially in case of unexpected events.

FEGLI Coverage Options

FEGLI offers several coverage options, each designed to meet different needs and circumstances. It is important to understand that after your initial employment selections, you can only add more coverage at a qualifying life event or at a FEGLI open season. There is no prescribed frequency of FEGLI open seasons. The last one occurred in 2016, and there is currently no open season scheduled for the foreseeable future. You can reduce or cancel FEGLI whenever you would like. FEGLI options include:

Basic Insurance 

All federal employees are automatically enrolled in Basic Insurance unless they waive or reduce their coverage. The coverage amount is equal to the employee's annual basic pay, rounded up to the nearest thousand dollars, plus an additional $2,000.

Optional Insurance

In addition to Basic Insurance, employees can choose to enroll in Optional Insurance, which includes three different types:

Option A: Standard Optional Insurance, with a fixed coverage amount of $10,000.

Option B: Additional Optional Insurance, available in multiples of the employee's annual basic pay, up to five times. Option B increases in cost every 5 years. The increases are very small until the employee reaches their mid 50’s. Then, it doubles in cost from 59 to 60, and continues to have very large increases every 5 years until it caps out at 80. This is very important to understand! 

Option C: Family Optional Insurance, which covers the employee's spouse and eligible dependent children. The coverage for spouses is $5,000 per multiple. For children, it is $2,500 per multiple.

Accidental Death and Dismemberment (AD&D) Insurance

This coverage provides additional benefits if the employee's death or a dismemberment occurs due to an accident. The AD&D is at no cost to the employee while actively employed. 

Benefits of FEGLI

Affordability: FEGLI offers competitive rates and group pricing, making it an affordable option for federal employees looking to secure life insurance coverage.

Guaranteed Acceptance: Employees are generally guaranteed acceptance into the program regardless of their health conditions, which can be particularly advantageous for those with pre-existing medical conditions.

Convenience: Enrollment and premium payments are typically straightforward and manageable, as they are automatically deducted from the employee's paycheck.

Portability: In some instances, coverage through FEGLI can be continued into retirement.

Conversion Option: When employees retire or leave federal service, they may have the option to convert their FEGLI coverage to an individual policy without undergoing a medical exam.

FEGLI Considerations

While FEGLI offers numerous benefits, it's important to consider the following factors before making a decision:

Coverage Amount: Assess your family's financial needs and choose a coverage amount that adequately protects them in case of your unexpected passing.

Term vs. Permanent Coverage: FEGLI is term life insurance, which means it provides coverage for a specific period. Consider whether you might need permanent life insurance to cover lifelong financial obligations.

Supplemental Coverage: Depending solely on FEGLI might not be sufficient for all families. Exploring additional private life insurance options can provide more tailored coverage.

Post-Retirement Considerations: FEGLI coverage can become expensive in retirement. Evaluate whether maintaining FEGLI coverage is the most cost-effective option once you're no longer employed. It is important to look at this earlier rather than later because private life insurance cost is based on age and health at the time of issuance. Far too many federal employees wait until they are nearing retirement to look at this and they may not qualify for an individual policy or the cost may be prohibitive at that point. 

Federal Employees Group Life Insurance (FEGLI) is a valuable insurance program that offers federal employees and their families essential life insurance coverage at affordable rates. With its various coverage options and benefits, FEGLI provides federal employees with the peace of mind that their loved ones will be financially protected in the event of their death. However, it's important to carefully review your needs, assess the coverage options, costs and future costs as well as consider supplemental insurance to ensure comprehensive protection for your family's future. 
The professionals at FEBA can help you sort out the important considerations related to FEGLI, so that you can be confident that you have made the appropriate choices to fit your individual needs. We can help you understand what FEGLI coverage you have now, and what retirement choices you will have regarding those options. Contact us today for a free consultation.

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