FEGLI Life Insurance Payout

FEGLI 101: What is the Federal Employee Group Life Insurance program?

The Federal Employee Group Life Insurance (FEGLI) program is term life insurance coverage available to most federal employees, with some costs split between feds and the government. FEGLI is composed of two main parts, “Basic” and “Optional,” which can be thought of like a tree. The Basic option acts as the trunk, with three optional coverages, “A,” “B,” and “C” as the branches.

Basic Coverage

Should an employee or retiree pass away, Basic FEGLI provides the Federal Employee’s/Retiree’s beneficiary a death benefit close to their annual rate of basic pay. The death benefit amount paid is slightly higher than the deceased’s annual salary was at death. Basic FEGLI Death benefits calculation is as follows; annual salary rounded up to the nearest thousand, then add an additional $2,000. (So, for example, a salary of $50,400 would provide FEGLI benefits of $53,000.) Also, depending on the federal employee’s age, FEGLI Basic coverage might provide beneficiaries with even more if the covered employee is younger than 45 years old. Under the age of 35, the amount of coverage is doubled (meaning the $53,000 illustrated above would be $106,000) and between the ages of 35 and 45, the benefit provided gradually reduces 10% per year for 10 years.

2/3 of the cost for FEGLI Basic is paid by the employee while 1/3 of the cost is covered by the government.

When beginning federal service, a new hire is automatically enrolled in FEGLI Basic.  The premium cost is not tied to any type of age or health factor. Currently, the price is $0.325 for every $1000 of coverage qualified for. 

Unlike the Federal Employees Health Benefits (FEHB) program, where there is an annual “open season” during which time employees can enroll or change their FEHB coverage- there is not a regularly scheduled FEGLI “open season” for employees to elect, increase, or change their optional coverage. An employee can drop FEGLI coverage at any time using Form SF 2817. Employees should carefully evaluate their situation before doing so, because re-enrolling is not as easy. 

If FEGLI Basic is waived, it can be re-added at almost any point throughout their career, however, additional requirements will apply.  For example, those could be a medical certification or a Qualifying Life Event (QLE).  Examples of a QLE are marriage, birth or adoption of a child, etc. (Note: retiring from the Federal Government is not considered a QLE.)

There are also ways for both federal employees and annuitants to access some or all of FEGLI Basic benefits before death, but these living benefits can only be considered when the employee or annuitant has been diagnosed with a terminal illness.

Basic Coverage in Retirement

Employees who retire from the federal service, and have maintained FEGLI benefits for five years or more, will have the option to keep or reduce their coverage in retirement. 

• Option 1: keep 100% of the benefits and pay a substantial increase in premiums. 
• Option 2: keep 50% of the benefits and pay half of the substantial increase in Premiums. 
• Option 3 is a bit more unique, and called the 75% reduction option. 

This is how it works: If a federal employee retires under the age of 65 and elects the 75% reduction option, they will keep paying the same premium they paid as employee to age 65. At age 65, without paying any further premiums, FEGLI Basic coverage remains in place, gradually decreasing 2% each month. Once there is only 25% of the original basic coverage remaining, the 2% reduction stops and the remaining death benefit amount will stay level for the rest of their life, without any future costs.  This election is why, upon entering retirement from federal service, it is generally not a good idea to completely drop FEGLI basic.   

Optional Coverage

In addition to the Basic FFEGLI coverage, there are three types of Optional insurance that can be elected:

• Option A – Standard
• Option B – Additional
• Option C – Family

Electing Basic FEGLI coverage is prerequisite to enrolling into the optional coverages. If the Federal Employee is not enrolled in Basic FEGLI, they cannot enroll in any optional coverage. 

New hires are not automatically enrolled in options A, B, or C, like they are for FEGLI Basic. While the three optional benefits can similarly be dropped whenever an employee desires, re-enrolling or adding them later is much trickier than with Basic.  

FEGLI options A, B, and C can also only be added under certain circumstances: during very rare FEGLI Open Seasons (the last one occurred in 2016), or within 60 days of experiencing a QLE, which stands for “Qualifying Life Event” – such as marriage. (Note again: retiring from the Federal Government is not considered a QLE.) A third route to enrolling in optional FEGLI coverage entails getting a physical to determine if the enrollee’s health allows them to attain their desired life insurance option(s), similar to physical evaluations conducted when one applies for individual life insurance policies from private insurance providers. 

Reminder:  Another difference between FEGLI Basic and it’s three options is that 2/3 of the cost for FEGLI Basic is paid by the employee while 1/3 of the cost is covered by the government. With Options A, B, and C, the full cost for all optional insurance elected is paid 100% by the covered federal employee or annuitant.  Click Here for current FEGLI costs.

Option A insures the employee’s life for an additional $10,000 on top of the Basic benefits. The premium price depends on the federal worker’s age, with younger employees paying less. 

FEGLI Basic includes accidental death and dismemberment (AD&D) coverage, and Option A also adds an additional amount of AD&D insurance. Both types of AD&D coverage, from FEGLI Basic and option A, disappear upon entering retirement. 

Option B insures a federal employee or annuitant’s life with additional coverage that is equal to their salary, plus a multiplier between 1 and 5, and then that number is rounded up to the next thousand, and then another $1,000 is added. 

Option C insures the lives of the employee’s spouse, and also their eligible dependent children (until they reach the age of 22.) The premiums increase with age like those for option B.  Also, like FEGLI Option B, FEGLI Option C can either be reduced or maintained at age 65 and beyond, into retirement. 

Optional Coverage in Retirement

The optional coverages may be continued in retirement by paying the prevailing premiums.