When you first started working for Uncle Sam, you were automatically enrolled in the Federal Employees’ Group Life Insurance (FEGLI) Basic Plan with the ability to increase coverage with options A, B or C.
However, FEGLI policies are group term life insurance that don’t build any cash value. Another downside is that Option B premiums begin to increase at age 35 and continue to rise every five years. By age 50, Option B becomes cost prohibitive.
This is why it’s important to understand how your life insurance needs change over time and the best ways to adjust coverage for a better value.
Life Insurance During Different Life Stages
As a young adult starting out in your federal career, FEGLI’s Basic coverage could help cover funeral expenses in the event of your untimely death. It could also provide your beneficiary with cash they may need to settle your financial affairs and deal with moving your belongings.
When you’re newly married, life insurance helps cover the loss of your income so that you spouse doesn’t have to drastically change their lifestyle if you pass away. Once children come along, increasing coverage is usually the next logical step.
When your kids are out on their own and you enter the empty nest stage, your need for life insurance changes. Many retirees want to have enough coverage to help ensure their surviving spouse can pay debts, outstanding taxes, and other expenses, without draining your TSP. However, FEGLI life insurance is not your only option.
“Mortgage Insurance can eliminate the biggest expense for every retiree: housing.”
Other Types Of Insurance To Consider
Once you’re retired, there are a few alternatives to life insurance that can provide the additional funds your spouse may need to help cover expenses when you’re gone:
Annuities are life insurance products you can purchase that provide a guaranteed stream of retirement income plus a death benefit for survivors. Different riders can be added to customize coverage for your specific needs.
Mortgage Insurance can eliminate the biggest expense for every retiree: housing. Once your mortgage is paid off, your spouse can sell the home and add the proceeds to their retirement savings. Or, they may decide to leave the property to your children.
Long Term Care (LTC) Insurance helps cover the rising cost of non-medical custodial care in a nursing home. With the nationwide price of a private room averaging over $9,000 per month, this expense can wipe out your TSP if you don’t have LTC insurance.
Talk with an FRC® trained advisor who can discuss the advantages of different types of insurance products to protect your retirement lifestyle.
