Is Life Insurance Better Than the FERS Survivor Benefit?

FERS survivor benefits options are expensive. Can federal employees ave money by using life insurance instead?

Yikes! Survivor Benefits on your FERS pension are expensive! There must be a better way to make sure your spouse is financially okay, right? Life insurance has got to be cheaper, right? 

Maybe, but there are some curveballs.

Sticker Shock

You better be sitting down for this one. You know your FERS pension, the benefit you’ve worked decades to earn? I’ve got good news and bad news about it.

The good news is that you will continue getting your pension for the rest of your life. 

The bad news is that if you’d like your spouse to continue getting a piece of your pension if you die first then it is going to cost you… a lot. 

Here are the options:

  • Full Benefit: Take a 10% reduction to your pension while you are both alive so your spouse would get 50% of your pension if you were to die first
  • Partial Benefits: Take a 5% reduction to your pension while you are both alive so your spouse would get 25% of your pension if you were to die first
  • No Benefit: You don’t have to leave a survivor benefit. If you don’t then there is no pension reduction but your pension would go away once you die. Also, your spouse would not be able to stay under your FEHB (health insurance) after you die without a survivor benefit. 


If your pension is $4,000/month and you elect the full survivor benefit then you’ll receive $3,600/month while you are both alive and your spouse would receive $2,000/month if you died first. 

So electing a survivor benefit will cost you $400/month which is $4,800/year! Not cheap!

Note: If your spouse passes away before you then the $400/month reduction will go away but you won’t get back any of the money you already paid into the system.

Where Are All the Better Options?

Survivor benefits sound a lot like life insurance, right? You pay some money now so that your spouse gets some money when you die. So can you just get a life insurance policy that will protect your spouse but cost less?

Spoiler: It’s possible, but probably not. 

There are two main types of life insurance out there:


This insurance is designed to last for a certain amount of time (ie 10 years, 20 years, etc). Once that term is up then you don’t have life insurance anymore. This type of insurance tends to be cheap (cheaper than survivor benefits) but doesn’t last your entire life, so if your term policy lasts until age 80 and you die at 81 then your spouse gets nothing.

Whole Life

This insurance is designed to last for your entire life but it is much more expensive and consequently is often not cheaper than survivor benefits. Additionally, if you have health issues then you may not even qualify for a policy.

The Two Big Ones

There are two main problems with trying to replace survivor benefits with life insurance.

Number one: survivor benefit income can be hard to replace as it provides a guaranteed monthly income for the rest of your spouse’s life that goes up with inflation over time.

For example, you’d have to get about a $600k Whole Life Insurance Policy to replace a survivor benefit that would leave $2,000/month to your spouse, and a $600k whole life policy would be expensive, especially if you got it in your 50s or 60s. 

Number two: if you don’t elect a survivor benefit then your spouse can’t stay on your FEHB (health insurance) if you die first. FEHB is a HUGE benefit and most people really don’t want to lose it. 

Bonus Reason: You must be in good health to qualify for reasonably priced life insurance. Everyone qualifies to elect survivor benefits regardless of their health. 

Out of Options

Here is the bottom line: Most people select survivor benefits if their spouses rely on their income/FEHB. 

You can shop around to see what life insurance rates you can get but it is difficult to replace all the benefits that come with survivor benefits. 

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.