Upon receiving the leave and earnings statement for the first full pay-period of 2014, many employees will notice that their premiums for Federal Employees Group Life Insurance (FEGLI) have increased. HR offices are used to fielding calls on this topic each January.
First, there are no overall changes in FEGLI premiums this year. The last change, a minor one, took place on 01/01/2012. The last major change in FEGLI was almost ten years ago and triggered our last FEGLI open season. FEGLI only runs open seasons when there are major changes in either coverage or premiums. In fact, FEGLI has had only nine open seasons since its inception in 1954.
Everyone who has Basic FEGLI and Option B will see a slight increase in their premiums for those two types of FEGLI.
The cost of basic FEGLI is 15 cents per $1,000 of coverage, and the coverage is based on your salary. With the 1% salary increase for 2014, many employees will see their premiums increase.
FEGLI Option B is also based on salary (multiples of one to five times your salary) and when salary goes up, so will the Option B premiums of many employees.
Any employee over age 30 will see an increase in their premium(s) for Option A, Option B and Option C if they have a birthday that results in their age ending in a 5 or a 0 (e.g., 35, 40, 45 etc.). All FEGLI Optional insurance is five-year renewable term insurance; in other words it will get more expensive every five years all the way up to the age of 80.
As we haven’t had a salary increase for three years, many readers will not have seen an increase in their premiums for that period of time. In fact, we may not have thought about life insurance for those three years; after all, out of sight is often out of mind. You might want to take the time to look at your FEGLI and any other life insurance you may have and see if it is appropriate for your current situation.
How much life insurance do you need, anyhow? As with many financial questions, the answer is “it depends”. Among the items you might want to consider when you are deciding how much life insurance is necessary are:
- Is your mortgage paid off? If not, how far are you from paying it off?
- Are your children grown and out of the house? Have they completed their schooling?
- How much extra income, if any, will be needed to run the household?
- Do you have any other responsibilities for which you need to insure? Examples might be, special needs child, elderly parents, etc.
The “Theory of Decreasing Responsibility” (a general rule that applies in many situations) indicates that the further along we are in our life, the less life insurance we need.