Created in 1954, the Federal Employees’ Group Life Insurance (FEGLI) program is the world’s largest group life insurance plan, covering more than 4 million federal workers, retirees, and family members. Despite its reach, many employees don’t fully understand how it works or what they’re really paying for.
The key point: FEGLI is term life insurance, not permanent coverage. In other words, you’re renting life insurance protection for as long as you remain covered, rather than owning a policy that builds lasting value.
The Basics of FEGLI Coverage
Under the FEGLI Basic program, participants receive term life insurance at group rates. The federal government pays about one-third of the premium, while employees cover the remaining two-thirds.
Your Basic Insurance Amount (BIA) equals your annual basic pay (rounded up to the next $1,000) plus $2,000.
However, since FEGLI is term coverage, it builds no cash or paid-up value. And if you leave federal service before retirement, your coverage typically ends.
What Happens at Age 65 or Retirement
When you retire or turn 65 (whichever comes later), you must choose how your FEGLI Basic coverage continues:
- 75% Reduction – Your coverage declines by 2% per month until it reaches 25% of its original value. Once reductions begin, your Basic coverage becomes free for life.
- 50% Reduction – Coverage declines by 1% per month until it reaches 50% of the original amount. You’ll continue paying a reduced premium for this option.
- No Reduction – Coverage stays at its full amount, but you’ll pay significantly higher premiums for the rest of your life unless you later switch to a reduction option or cancel.
Why Permanent Life Insurance May Offer More Value
Private-sector permanent life insurance can provide broader, longer-lasting protection, often without FEGLI’s limitations. Unlike FEGLI Basic, permanent policies don’t shrink after retirement, and they build cash value you can borrow against or use later in life.
Federal employees can also take their policy with them if they leave federal service or move into the private sector. And in many cases, survivor benefits for your spouse or dependents may be higher and more flexible.
If you’re nearing retirement, it’s worth comparing your FEGLI options with alternatives in the private market. A Federal Retirement Consultant (FRC®) can help you evaluate policies that offer stronger, more consistent coverage than FEGLI alone.
