Federal employees often assume their life insurance is “handled” through FEGLI, but that assumption can lead to costly mistakes over time. While the Federal Employees’ Group Life Insurance program offers convenience and guaranteed coverage, it isn’t always the most efficient or appropriate solution, especially as careers progress and retirement approaches.
One of the most common mistakes is relying solely on FEGLI without ever comparing alternatives. Early in a federal career, FEGLI can be a solid option since it requires no medical underwriting and is easy to enroll in. But the structure changes significantly with age. Premiums, particularly for optional coverage, can increase every five years, and those costs can become substantial later in life. Many employees simply accept those increases without evaluating whether a private policy could provide similar or better coverage at a lower long-term cost.
Another major issue is not understanding how those rising premiums impact retirement planning. It’s not uncommon for retirees to carry large FEGLI policies into retirement, only to realize too late that the cost is eating into their fixed income. At that stage, switching to a private policy may no longer be feasible due to age or health. The better approach is to evaluate options well before retirement, when underwriting is still favorable and more choices are available.
Federal employees also frequently carry more coverage than they actually need. Life insurance is meant to protect against financial loss, replacing income, covering debts, or supporting dependents. But once major obligations are reduced or eliminated (mortgage paid down, kids financially independent, retirement income secured through FERS and TSP), the need for large policies often declines. Continuing to pay for unnecessary coverage is a quiet but significant drain on long-term finances.
Finally, many people make the mistake of treating life insurance as a one-time decision. In reality, it should be reviewed periodically, especially after major life events or career milestones. Federal benefits are complex, and life insurance decisions should be made in the context of the full picture, including pension income, survivor benefits, and other assets.
The bottom line is simple: convenience shouldn’t replace strategy. FEGLI can play an important role, but it shouldn’t go unquestioned. A Federal Retirement Consultant (FRC®) can review your coverage, compare options, and align your policy with your actual needs. A complimentary consultation can prevent overpaying and help ensure your protection truly fits your long-term plan.
