When you first start working for Uncle Sam, The Federal Employees’ Group Life Insurance program (FEGLI) offers relatively inexpensive group term life insurance. You’re automatically enrolled in the FEGLI Basic plan and you can purchase additional coverage with Options A, B and C. Though the low cost of FEGLI make sense when you’re younger, as you approach retirement you may do better with other types of life insurance products.
Term Life Insurance
Term Life Insurance products like FEGLI provide a death benefit for a specific period of time and do not build any cash value. It’s usually the least expensive life insurance for those who simply want to cover their family’s immediate financial needs when the primary earner passes away unexpectedly. As a result, term life insurance like FEGLI Basic is considered a good value for young families just staring out. As you reach middle age and older, term life insurance may not be the best fit for your needs.
Whole Life Insurance
Since Whole Life Insurance is a permanent policy, it provides coverage for life and builds cash value that you can access at any time for any reason. Depending on the how the policy is written, it may be eligible to earn dividends that increase the death benefit and cash value. Unlike term life insurance, it never expires as long as you continue making payments but premiums are higher because it covers you for your entire life. However, upon your death, your beneficiaries receive a guaranteed lump-sum cash payout.
“Like Whole Life, you can access the cash value of your Universal policy for any reason including using it to make your flexible premium payments.”
Universal Life Insurance
In addition to providing lifetime coverage and building cash value, Universal Life Insurance enables you to raise or lower premium payments within certain limits. Like Whole Life, you can access the cash value of your Universal policy for any reason including using it to make your flexible premium payments. When it comes to the death benefit, some policies offer a guaranteed amount as long as specified premiums are paid.
Variable Universal Life (VUL)
Variable Universal Life Insurance (VUL) offers permanent coverage plus the ability to make investment choices within the policy. Like Universal Life, premium payments are flexible as long as you have build enough cash value to cover administrative costs and other charges. Since the account value is tax-deferred, it’s tax free as it accumulates dividends. And most policies enable you to choose the amount of the death benefit.
To learn more, touch base with an FRC® trained advisor who can help you compare FEGLI to various private-sector policies. And ask about another type of life insurance product ideal for retirees: a Lifetime Annuity.
