The Federal Employee Group Life Insurance is the largest group life insurance in the U.S. The benefit covers over 4 million FederalEmployees. Understanding your options within FEGLI will allow you to make the best decisions for you and your family. This blog post will cover options for life insurance for federal employees.
FEGLI provides three options for participants. Employees automatically get enrolled in the basic option and have the option of enrolling in option B & C. You can opt out of the
basic option, however there are some nice advantages to the basic option. When participating in this option the Federal Government pays for a third of the cost while the employee pays for two thirds. Cost does not increase as you get older with the basic option.
The basic option allows you to have life insurance coverage up to your base pay, plus an additional $2,000. If for example your base pay is $50,000 per year, you can have up to $52,000 in basic life insurance coverage. Since younger and older employees pay the same amount for coverage, younger employees get an Extra Free Benefit. Federal Employees under the age of 35 get their basic death benefit doubled at no additional cost. Beginning with age 35, the extra benefit is reduced by 10% each year until the employee reaches age 45, when there is no longer any Extra Free Benefit.
Option B is a benefit that is completly paid for by the employee. You can choose to elect coverage anywhere between one up to five times your base bay. That means that a federal employee earning $50,000 per year can choose between $50,000, $100,000, $150,000, $200,000 or $250,000 of coverage. The cost of option B increases as you get older.
Option C is a life insurance benefit for your spouse or unmarried children under age 22. You can elect between $5,000-$25,000 in coverage for a spouse, and up to $12,500 in coverage for children. The cost of option C increases with age just like option B.
FEGLI lets you convert your policy to an individual policy when your group insurance ends, however there are some things you need to know. You have a 60 day window to convert the policy once a terminating event occurs. If you miss the window, you're out of luck. Additionally, you can't convert your policy to an inexpensive aaa term life policy, instead only more expensive cash value policies are an option.
FEGLI has a great calculator on their site which I used to create an example that can help you understand the cost of benefits. In my example, I am using a 50 year old employee earning $50,000 per year.
A 50 year old employee earning $50,000 per year could get the following coverage: $52,000 in Basic coverage, $250,000 in Option B, and $25,000 for a spouse, and $12,500 for children. Coverage for the employee him/her self would cost $90.43 per month, while the option C coverage would be an additional $10.20 for a total of $100.23 per month.
As this employee ages, the cost of coverage will increase significantly. At age 55 the same individual would be paying $163.70 per month. At age 60 cost would be $340.93 per month, and at age 65 total cost per month would be $399.65 per month.
Earlier we mentioned that a 60 year old employee would be $340.93 cents per month for $250,000 in coverage. An alternative would be to shop for your own individual term life policy, which would allow you to save money and lock in your monthly costs for a long time, instead of having your coverage increase every 5 years.
A healthy 60 year old could get the same $250,000 in coverage at $62 per month for a 10 year term, locking in the rate for 10 years, or a 20 year term for $113 a month, locking in the rate for 20 years. Ofcourse, your rate would be based on your health, but most people can save significantly by purchasing their own policy, then keeping their Federal Employee Group Life Insurance policy.
At ChooseTerm.com we specialize in life insurance for federal employees and helping Federal Employees figure out if they can save money by getting their own life insurance policy. Please call us or fill out our quote form and we can help you save money on your FEGLI benefits.