5 Reasons to Consider Replacing Your FEGLI

As a government employee, you have access to a range of federal benefits, including the Federal Employees’ Group Life Insurance (FEGLI) program. While this program offers valuable coverage for you and your loved ones, it may not be the best fit for everyone’s needs. If you’re considering whether to replace your FEGLI policy, there are several important factors to consider.

In this article, we explain everything you need to know about replacing your FEGLI policy as a government employee. From understanding the basics of FEGLI coverage and premiums to exploring alternative insurance options and evaluating your unique needs, we’ll help you make an informed decision about what’s right for you.

What is FEGLI? 

FEGLI is a group-term life insurance program that covers federal employees and their families. It provides coverage up to the amount of an employee’s annual salary, plus $2,000. The cost of this insurance is shared between the employer and employee, with the employer covering one-third of the premium cost.

In addition to basic life insurance coverage, FEGLI offers optional coverage for employees who want additional protection for themselves or their family members. This includes options such as Accidental Death and Dismemberment (AD&D) coverage and Family Coverage, which can cover spouses and dependent children.

How Does FEGLI Work? 

The FEGLI program has been around since 1954, and its popularity among government employees has only grown over time.

To be eligible for FEGLI benefits, you must be a federal employee who is enrolled in a qualifying plan. You may also be eligible if you are a retired federal employee who was previously enrolled in the program. 

FEGLI offers multiple types of benefits based on your situation:

• FEGLI Basic: Your yearly wage determines the FEGLI Basic. Your yearly salary, rounded to the next thousand, plus $2,000, is your coverage amount.

• FEGLI Option A: Option A simply adds $10,000 more in insurance coverage. For people who only want their funeral costs covered, this is the ideal option. 

• FEGLI Option B: The most flexible FEGLI coverage is Option B. You can choose a coverage quantity that ranges from 1 to 5 times your yearly pay. Note:  your age has a significant impact on the cost of Option B. Younger employees will pay less than older employees. 

• FEGLI Option C: You can extend coverage to your qualifying spouse or dependent children by choosing Option C. Additionally, you can choose the level of coverage due to its flexibility. 

Reasons to Consider Replacing Your FEGLI 

While FEGLI provides life insurance coverage and can be a valuable asset for you and your family, certain situations may warrant considering replacing it with another life insurance policy.

#1. Rising Premium Costs 

As you age, your FEGLI premiums will increase. It can become significantly expensive for federal employees that are 50 or older. 

It is also important to note that FEGLI coverage decreases as you age as well, resulting in you paying more for less coverage. 

#2. Cannot Continue Coverage After Retirement 

With FEGLI, you cannot continue to receive coverage after you retire and all coverage types decrease significantly when you retire. Generally, your coverage will decrease by 2% each month after you retire, until it reaches 25% of your original coverage amount. 

The fact that you won’t need to make payments is one great benefit of your FEGLI coverage diminishing. You can continue to receive your diminishing FEGLI coverage after you retire (at age 65) without continuing to pay. 

#3. Zero Cash Value Accumulation 

One of the best features of a Permanent Life insurance policy is Cash Value Accumulation. Depending on the organization and product type, the premiums you pay are used to accrue monetary value among many other advantages.

You won’t find a perpetual life insurance product with FEGLI if you’re looking for one. FEGLI does not offer the option to accumulate any type of cash value.

Unlike other types of life insurance policies, FEGLI is a term life insurance policy that provides coverage for a specific period. If the insured individual passes away during the covered period, their beneficiaries will receive a death benefit payout. However, if the individual outlives the covered period, there is no cash value accumulated from this policy.

#4. No Conversion Options 

Many people assume that the FEGLI program provided by their employer is sufficient coverage. While this may be true for some, there are many benefits to considering a term life product outside of FEGLI since you cannot convert your FEGLI coverage. 

One major advantage is the ability to customize your coverage with various types of riders. These riders can provide additional protection for specific circumstances or events, such as accidental death or critical illness. 

Furthermore, a term life policy outside of FEGLI allows you greater flexibility in choosing the length and amount of coverage that meets your needs.

#5. Lower Coverage Limits May Not Be Enough 

Many people may not be aware that the coverage limits may not be enough to provide adequate protection for their loved ones in case of an untimely death. 

With FEGLI, you can choose to be covered for up to five times your yearly earnings. When you’re younger or have no one depending on your income, this can be a good option for you. But five times your yearly pay might not be sufficient to safeguard your family if you were to suddenly pass away. 

Federal Benefits Help 

Replacing your FEGLI may seem like a daunting task, but with the right guidance and knowledge, it can be a smart financial decision. Federal Educators is here to help you understand your federal benefits and make informed decisions about your insurance coverage. 

Contact us today at (813) 755-7037 to learn more about how we can assist you in planning for your future. Don’t wait until it’s too late – start planning NOW for a secure financial future!