- A basic overview of FEGLI and how it works-
- Understanding what happens to FEGLI after retiring from federal service
- One thing to avoid – don’t drop coverage when you can keep some coverage at no additional cost.
The Federal Employee Group Life Insurance (FEGLI) program is the largest group life insurance plan in the work, consisting of over 4 million federal workers and retirees. It is comprised of four components: Basic coverage, and three types of optional insurance that can be added to basic, known as “A,” “B,” and “C.” It can help to picture FEGLI like a tree with “Basic” being the trunk and options A, B, and C being the branches. As a brief review, option A provides an additional $10,000 in coverage, option B offers multiples of basic coverage (2x-5x), and option C is for family coverage.
Don’t miss the next webinar on FEGLI and other Life Insurance options for federal workers
When retiring, the four components are treated differently. With FEGLI Basic, you’ve got three options: drop coverage completely, keep full coverage, or reduce coverage. Keeping full coverage can become increasingly expensive, but if you have a life-threatening condition, maintain FEGLI-Basic can make a lot of sense. As for reducing it, FEGLI basic can be reduced by 50% with a lower premium, or decreased to 75%.
If you’re 65 or older, retired, and held the coverage for at least 5 years, though, the remaining 25% of coverage stays in effect at no additional cost. But this a no-brainer, no fed should irrevocably drop all of their FEGLI coverage when they leave federal service to retire. If you retire before reaching age 65, paying for FEGLI until you get there might be the only deterrent when deciding to keep at least ¼ of your Basic FEGLI in retirement. Same goes for option A coverage, but not options B and C.
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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.