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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Retirement Benefits Institute provides benefits and retirement training to federal employees. Our trainers and sponsors have instructed thousands of federal employees, making it possible for many of those to obtain personal consultation and receive assistance in specific federal benefit planning to maximize their assets. Contact us for more information at (877) 864-1145 or click this link to email us.

Disclosure The information provided is not intended as tax or legal advice. Figures shown are for illustrative purposes only furthermore, the information nor the illustrations provided may not be used to avoid any tax penalties. This content represents the general views of Christy Capital Management and should not be regarded as personalized investment advice Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice. Retirement Benefits Institute, Inc., and a portion of its contents merged with Christy Capital Management Inc. Brandon Christy, former President of Retirement Benefits Institute, is also the current President of Christy Capital Management, Inc, a registered investment adviser.