- Which federal employees are eligible for the Federal Employee Group Life Insurance program?
- What to know about dropping and adding coverage.
- When should feds look into private life insurance options?
The FEGLI program covers almost all members of the federal government’s civilian workforce. Military servicemembers can also participate in the group life insurance program. In fact, the only three categories of employees who are employed by the US federal government and not eligible for FEGLI are:
- Feds technically employed by corporations that are overseen by the Farm Credit Administration (subagency of the USDA).
- Temporary positions – such as seasonal USPS employees who work only during the holidays.
- Overseas teachers who receive their paycheck from the Dept. of Defense (DoD).
Want to learn more about your FEGLI coverage? Attend our no-cost FEGLI webinar for federal employees, retirees, and their families
When a new hire first joins the federal government’s workforce, they are automatically enrolled in FEGLI Basic coverage, which was created in 1954. The FEGLI basic benefit amount is equal to a fed’s salary, rounded up to nearest thousand, and then an additional $2000 is added on top of that. Optional FEGLI insurance was added in 1968 and includes FEGLI parts A, B, and C. Part A provides and additional $10,000, part B provides additional life insurance coverage that is equal to a multiple of the fed’s salary (from 1x to 5x), and part C covers family members, both the spouse and dependent children.
Adding or Dropping FEGLI
While FEGLI can be dropped at any point during a federal career, but adding or changing coverage is another story. There are super-rare open seasons that occur every few decades or so (last one was in 2016) in which feds can change or add FEGLI insurance, but otherwise, FEGLI can only be adjusted or added if there is a QLE (qualifying life event), which can include marriage, divorce, a child’s birth – but not retirement from the federal government! There is a third route to adjusting or adding FEGLI coverage that involves getting a evaluated by a physician.
Upon retirement, there are decisions to be made regarding keeping FEGLI with a full or reduced benefit or dropping entirely, but FEGLI Basic or optional insurance cannot be added when you retire because retirement is not a QLE. Also- to keep the insurance post-retiring, one must’ve had continuous Basic coverage for at least 5 years before their retirement date.
Is FEGLI a Good Option for Life Insurance?
FEGLI can be great for a lot of folks, but it is important to understand how it works when it comes to determining if keeping FEGLI is a better financial decision than obtaining a private individual life insurance policy. The short answer: it depends, and it mostly depends on your personal health and life expectancy. The FEGLI program is largest such group life insurance plan in the world and that means it covers a vast array of individuals – including people with unhealthy lifestyle habits (like smoking cigarettes) and other health-related issues (like genetic dispositions to diseases or obesity) and that means healthier individuals are picking up the slack. Also, FEGLI is structured in such a way that the premiums are cheaper for younger feds. Therefore, keeping FEGLI insurance can be a pretty smart decision for federal employees who are 45 years old or younger. And if you know you are going to have trouble obtaining affordable private life insurance due to health-related or lifestyle factors, then keeping FEGLI coverage beyond the age of 45 can be smart even as the premiums increase while coverage decreases. (At age 35 or younger, your FEGLI benefit is actually doubled. Between ages 35 and 45, this doubled coverage gradually erodes from 2x to 1x the FEGLI basic benefit amount.)
Recap: Eligibility for FEGLI Coverage
Unless you are a fed employed by a corporation supervised by the Farm Credit Administrations, an overseas teacher employed by the Department of Defense, or in a temporary position – all member of the federal workforce are eligible for FEGLI coverage.
FEGLI coverage includes “Basic” insurance and then there are three types of optional coverage that can be added on top of FEGLI basic. Part A adds $10,000 in life insurance, part B adds 1x-5x a fed’s salary, and part C provide life insurance for the fed’s immediate family members.
Even though FEGLI can be dropped at any point – adding or changing coverage is another story. Other than very rare open seasons, the only time you can change or add optional coverage to your Federal Employee Groupe Life Insurance plan is when experiencing a QLE. Otherwise, you will need to get evaluated by a physician, which is similar to the process one goes through when applying for private life insurance policies.
Check out this article about managing your FEGLI plan in retirement.
When it comes to the FEGLI program, it covers all types of people, even those with unhealthy lifestyles or life-threatening medical conditions. If you are in your forties or older and on the healthier end of the spectrum, considering a private life insurance plan might be the wiser decision when developing your financial and estate plans. For feds younger than 45, FEGLI is relatively cheap, and your benefit is 1.1x to 2x more than their older federal coworkers.
Now read this article about Top 5 Things Feds Should Know about FEGLI.
And if you need help with retirement planning, understanding your federal benefits, or evaluating your life insurance options, schedule an appointment with an STWS Advisor!
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Until Next Time
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**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.