FEGLI Cost Structure

As many Federal employees may have noticed, Federal Employee Group Life Insurance (FEGLI) costs for Option B rise every 5 years. When you first started working for the Federal Government, FEGLI seemed like a great deal because of the extra coverage given to those under age 45. However, as you get older the price continues to increase. It is important to note, Basic FEGLI coverage only increases as salary increases. The FEGLI Options increase with age and salary. Below is an illustration of the cost increases for Basic and Options while employed. In this chart we are assuming a $100,000 salary and FEGLI Basic, Option A, Option Bx5, and Option Cx5.

As the graph illustrates FEGLI prices increase every five years, with a substantial increase at age 60. The chart below illustrates prices in retirement.

This graph uses the same assumptions as the first and shows retirement at age 60. As you can see, prices started around $1,400 per year while employed and age 45. By the time retirement rolls around and you reach your late 70’s, the price has increased to over $26,000 per year. These numbers may seem astonishing, but this is how FEGLI was designed to work. It was not intended to be a long-term solution to your insurance needs. In fact, it is a term policy. The question now becomes, what do you do about it?

1. Look at your Life insurance needs. Are you paying for more death benefit than you actually need? Maybe you no longer have a mortgage and do not need as much term insurance. Maybe you have decided you would like to have permanent insurance instead. As many Federal employees approach retirement, survivor annuity options become one of the biggest issues. Do you want your life insurance program to handle this concern as well? To learn more about Survivor Annuity options, click here.




2. You can also consider private insurance. Ask your financial advisor or insurance agent to run some quotes. If you are in average health, private insurance could be cheaper. Most private life insurance policies do not increase prices during the length of the contract. It never hurts to run the numbers and find out the best solutions for you and your family.

* All FEGLI premium costs derived from OPM FEGLI Calculator.

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Disclosure The information contained in this blog should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individual’s specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also President of Christy Capital Management, Inc., a Registered Investment Advisor.