How to Maximize FEGLI

When should you opt into or out of the Federal Employees Group Life Insurance (FEGLI) program?

FEGLI, or Federal Employee Group Life Insurance, is one of the largest group term insurance programs in the world and has many advantages. That being said, there are times that it simply doesn’t make sense anymore.

This article will help you understand when to opt-in and when to opt-out to get the most out of the program for you. 

Here are some big questions to ask yourself:

Do You Need Life Insurance?

Before thinking about what type of life insurance you should get, you need to know exactly what you are insuring against. Some people simply don’t have a need for life insurance. This may be a single person without debts and who has plenty of cash for anything that might come up. 

Others with families, debts, and other commitments may want to get coverage to ensure that they don’t leave a mess for those that they leave behind.  

Once you are certain that you need insurance and you have a pretty good idea of how much you need, the next question is where to get it. 

To FEGLI or not to FEGLI

There are 3 major things to consider when deciding if FEGLI is the best fit for you.

1. Pre-Existing Conditions

One of the major perks of FEGLI is that there are no physical exams to get coverage assuming you enroll at qualifying life events. This can be a huge benefit for those whose health would make it difficult for them to get individual coverage somewhere else. For someone with preexisting conditions, this might be the only option they have to get coverage.

2. Cost

Because FEGLI is such a large plan, they have great premium rates for those that are young. For those under 45, the rates tend to be very competitive.

But as you get into your 50’s and 60’s, the cost of FEGLI starts to increase dramatically. As you can see on the chart below, the premiums start to double from age 50 to age 55.

Age GroupBiweekly, per $1,000
Under 35$0.02
35–39$0.03
40–44$0.04
45–49$0.07
50–54$0.11
55–59$0.20
60–64$0.44
65–69$0.54
70–74$0.96
75–79$1.80
80 and over$2.64
Source: https://www.opm.gov/healthcare-insurance/life-insurance/program-information/#url=basic_em

And because there are little underwriting requirements, the cost is the same for a 500 lbs chain smoker and an elite athlete who happens to be the same age. 

Once you approach these ages, you may want to shop around for life insurance on the private side to see if you can get better rates.

Note: In this article, the type of FEGLI coverage that I am talking about is the Option B coverage. The Basic FEGLI coverage, on the other hand, is the coverage that you get automatically as an employee and the government pays for a portion of the premiums. The premiums for this coverage do not increase with age like they do for the other types. Consequently, some employees choose to keep this coverage for much longer than they keep the Option B coverage. 

3. More Coverage

Over the years, FEGLI has not changed very much. However, on the private side, insurance companies have started to offer policies that cover much more than just your life.

For example, some policies provide benefits if you have a life-threatening illness but survive. This type of coverage will probably become more and more relevant as the medical field gets even better at treating diseases. 

These types of policies can be a great way to cover multiple risks with one solution. 

Conclusion

FEGLI can be a great solution for many federal employees but it is far from a one-size-fits-all solution. Feds will want to reassess their situation every couple of years to make sure they still have the best coverage for them. 

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.

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