The Federal Employee Group Life Insurance program is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. Quite a few of those covered employees don’t truly understand what they have in coverage and what their options are. They signed up for whatever options sounded most efficient and it is common that they haven’t re-examined it since their hire date. If a Federal Employee was hired young maybe they had a family or someone relying on their income. Since then things have changed and in some cases that same employee may not need as much life insurance or any at all. In this article we will discuss the four parts of FEGLI and how it affects you while working. In a follow up article we will discuss your FEGLI options in retirement.
FEGLI Basic
The first part of your life insurance is called Basic. FEGLI Basic is your salary rounded up to the nearest thousand plus two thousand dollars. For example; if you earn 52,800 per year your coverage would be rounded up to the nearest thousand 53,000 then add on an additional two thousand. So your Basic Coverage death benefit would be $55,000. This basic option costs fifteen cents per thousand dollars in coverage each pay period. It is very important to note that the cost per thousand does not increase over time. Some advisors who do not know the Federal Life insurance program, incorrectly advise people to cancel this insurance as it “gets too expensive as you get older”. That may be true of another part of the FEGLI which is discussed later in this article but not true of your basic.
To see what you’re paying for your Basic coverage you can reference your leave and earnings statement. FEGLI Basic sometimes shows as FEGLI Regular deduction on your Leave and Earnings statement. If you are 35 years old or younger, you get what is called Extra Benefit. Extra Benefit doubles your basic coverage for no additional cost. Starting at age 35 it declines by 10% per year until at the age of 45 the Extra Benefit ends and all that remains is your Basic coverage.
Option A
The second option for your FEGLI is Option A. Option A – is an optional flat $10,000 additional coverage. The cost is based on your age and continues to go up every five years. The premium goes up every five years but the coverage remains a flat ten thousand dollars. Again this coverage is something you can elect or decline.
Option B
The third part of the FEGLI program is Option B. FEGLI Option B is an optional coverage you have to elect. It is an additional 1 to 5 times your basic pay. The cost is based on your age and goes up every five years. The cost per thousand is very competitive to the private insurance marketplace until you reach about age 50. You want to keep an eye on what you’re paying for your Option B. As mentioned before the cost goes up every five years, but the question is how much are the increases? The increases are fairly mild until you reach age 50. If you reference the chart below you can see that the cost goes up by about fifty percent between the age of 50 and 55. Look at the next increase though, at age 60 your costs will more than double! Again I recommend you examine your leave and earnings statement. Look for a deduction that says FEGLI Optional or if you simply have a second FEGLI deduction where the premium is high.
Option C
The final option we will look at is Option C. FEGLI Option C is known as the family coverage. Option C is an optional coverage where you elect coverage for your spouse and eligible dependent children. You can elect increments of $5,000 for your spouse and $2,500 increments on your children. You can elect up to five multiples for each family member. The cost is based on YOUR age and goes up every five years.
Now that we have learned about the different parts of FEGLI let’s review a few of the most common questions I get about FEGLI.
How do I know how much coverage I have?
The best place to look is to review your SF-50. Your recent Standard Form 50 Notice of Personnel action will describe in detail under “Box 27 FEGLI” what coverages and at what multiples you currently have. You can also reference your leave and earnings but that will only give you the costs not necessarily your coverages with most agencies.
Can I increase my coverage?
You can only enroll and increase your coverage in a few instances. Outside of an open season, eligible employees can enroll or increase their coverage by taking a physical exam or with a Qualifying Life Event. FEGLI life insurance open seasons are extremely rare and none are currently scheduled. Your agency and OPM’s website will announce when there is a life insurance open season coming up. The most recent FEGLI open seasons were held in 2004 and 1999.
Can I cancel my coverage?
Yes, you are able to cancel some or all of your FEGLI any time of the year. You are able to cancel some coverage but keep the other. For example cancel your Option B but keep your Basic. Another thing you can do is reduce your coverage. If the five times your salary Option B has become too expensive for you, you might want to reduce it to one to four times your salary. Keep in mind if you cancel or reduce your coverage you may not be able to re-acquire that same coverage as stated above. Be sure it is something you want to do before taking action.
Can I buy outside life insurance instead?
This can be an option but there are things to be considered. There are many types of life insurance and an outside plan does require underwriting. If you’re healthy an individual plan can possibly save you money. I recommend you meet with a life insurance professional who knows the Federal Life Program as well as the individual life insurance market place. Never cancel or reduce your FEGLI until you have been approved by the new Life Insurance Company.