When hired, federal workers are automatically enrolled in the Federal Employees’ Group Life Insurance (FEGLI) Basic plan with the ability to sign up for Optional policies (A, B, or C) to increase the benefit value and add beneficiaries. But, FEGLI premiums start to increase when you enter certain age brackets and, depending on your policy, coverage can decrease when you need it most: in retirement.
Let’s Look At Your Other Survivor Benefits
For most people, life insurance provides funds for dependent survivors who would find themselves in a tough financial situation if their family’s primary wage earner unexpectedly passed away. However, as a retired federal employee, your surviving spouse will receive a number of benefits that have nothing to do with FEGLI:
- FERS Annuity (Pension): A spouse (or former spouse, by court order) receives 50% of the FERS employee’s accrued pension paid as a monthly benefit.
- Thrift Savings Plan (TSP): Your designated beneficiary receives 100% of the balance of your TSP account when you pass away.
- Social Security: If you qualify,your widow or widower, at full retirement age or older, receives 100% of your benefit amount.
Of course, if you crunch the numbers and decide that the above benefits will not provide enough income for your surviving spouse, life insurance can fill in the gap.
“If you cancel a FEGLI policy when your beneficiary predeceases you, you get nothing.”
Compare FEGLI To Life Insurance In The Private Sector
Permanent life insurance policies offered by private companies may provide a better overall value in retirement than FEGLI.
- Rising Premiums: Unlike permanent life insurance premiums that remain fixed, FEGLI premiums keep rising even through retirement. In fact, FEGLI Option B premiums can become so cost-prohibitive as you age, at some point the death benefit is less than the sum of the premiums you’ve paid over the years.
- No Cash Value: Since FEGLI is term life insurance it doesn’t build cash value. Permanent life insurance builds cash value you can access and, if your beneficiary predeceases you, you can cancel the policy and receive the entire cash value. If you cancel a FEGLI policy when your beneficiary predeceases you, you get nothing.
- Expiration Date: Term life insurance like FEGLI has an expiration date which means the policy pays out if the insured dies during the established term of the policy. Permanent life insurance products provide lifetime coverage.
Before you make a decision about keeping FEGLI in retirement, touch base with an FRC® trained advisor who can help you compare FEGLI to private-sector life insurance products that may better suit your needs.
