The Federal Employees’ Group Life Insurance (FEGLI) Program is the largest group life insurance program in the world, covering over 4 million Federal employees, retirees, and many of their family members. FEGLI Basic is an excellent deal because the government picks up 33% of the cost of premiums and it doesn’t require a medical exam.
However, if you wanted to increase the amount of your coverage considerably, you would have to pay for FEGLI Option B entirely out of pocket. Then again, there are a few good reasons to consider dropping Option B as you approach age 50.
1. Option B Premiums Become Cost Prohibitive As You Age
Since the premium rates for Option B are based on age, they begin to increase at age 35 and continue to do so every five years. Once you turn age 50, premiums essentially double for every successive five-year age band. Also, since coverage is based on the amount of your basic pay, your Option B premiums increase with each pay raise. In fact, premiums become so cost-prohibitive as you age into retirement at some point the death benefit is less than all of the premiums you’ve paid over the years.
“Not to mention, permanent life insurance products are designed to build cash value and offer other advantages.”
2. Option B Does Not Accumulate Any Cash Value
Since FEGLI Option B is term life insurance it doesn’t build cash value you can access. Worse, if you cancel the policy because your beneficiary pre-deceased you, the premiums you’ve paid are lost forever. When you compare Option B to similar term life policies in the private marketplace, it doesn’t measure up when it comes to the cost of premiums after age 50. Not to mention, permanent life insurance products are designed to build cash value and offer other advantages.
3. Option B Death Benefit Is Limited To 5 Times Your Basic Annual Pay
When a family’s primary earner passes away, his or her survivors often depend on a life insurance death benefit to pay for any number of costs, from funeral expenses and uncovered medical bills to mortgage payments and school tuition. Federal employees who enroll in Option B can select amounts that are 1, 2, 3, 4, or 5 times their basic annual pay. For many, the limited death benefit may not be enough to adequately provide for their survivors.
When you consider the three points discussed above, permanent life insurance offers a better overall value than FEGLI Option B. To learn more about other life insurance products in the private marketplace, reach out to an FRC® trained advisor.
