Federal Employee’s Group Life Insurance: Advantages & Disadvantages

Written by Termland.com

The Federal Employee’s Group Life Insurance program (FEGLI) is the world’s largest group life insurance plan covering over 4 million government employees and their families. The FEGLI program is solid, but in some cases, it may not be the top solution to your life insurance needs. The information below is a general review of the strengths and weaknesses of the FEGLI term life insurance plan.

Advantages of the FEGLI Insurance Plan:

  1. If you accept the basic insurance option (which is automatic unless you waive coverage), you can elect optional insurance without having to do any medical exams. Therefore, you cannot be denied coverage if you accept it up front.
  2. The federal government covers 1/3 of the cost of basic insurance which is one time your base pay rounded to the next $1,000 plus $2,000. Additionally, the cost for basic insurance is fixed* as long as you are an eligible employee.
  3. Employees under age 45 automatically get extra coverage above the basic insurance amount at no additional charge. For more information on this extra benefit see, basic insurance age multiplication factor. This benefit is based on your age at the time of your death.
  4. Accidental Death and Dismemberment (AD & D) coverage is available at no additional cost for all employees that participate in Basic Insurance as well as the Standard Insurance option. Group AD & D benefits are paid in addition to other FEGLI benefits. For more details on AD & D coverage see accidental death and dismemberment benefits.
  5. A living benefits rider is included with Basic Insurance which allows you to receive a partial or full lump sum payment if you become terminally ill and are not expected to live more than nine months.
  6. In the event coverage under the FEGLI program stops or at retirement, you have an option to convert your policy. This conversion privilege allows you to exchange coverage under the FEGLI plan for a “portable” individual life policy without proof of health or medical conditions.
  7. Under the Option C Family Coverage, FEGLI offers optional spousal and dependent children’s insurance.

Disadvantages of the FEGLI Insurance Plan:

  1. Under the FEGLI plan’s optional insurance (A, B and C), insurance costs increase every five years.
  2. Monthly costs of Optional Insurance are excessive at ages 45, 50, 55 and beyond.
  3. FEGLI Optional Coverage is expensive and cannot compete with individual level term life insurance.  Low cost individual term insurance is much lower priced. Additionally, with level term insurance, you can guarantee or “lock-in” your rate for a longer period of time (I.E. 10, 15, 20 or even 30 years). For an actual price comparison see, comparing the FEGLI term life with low cost ordinary term life insurance.
  4. Coverage amounts are limited. The maximum amount of life insurance available (basic plus maximum option additional insurance) is approximately six times your current income. In most cases, your life insurance needs exceed these maximum limits. These numbers do not include accidental death and dismemberment insurance.
  5. At retirement, options are limited, coverage is likely to reduce and costs may continue to increase. For more details, see what happens to FEGLI when I retire?

For an actual price comparison see, Cost Comparison: FEGLI versus low cost level term life insurance.

* Coverage costs are fixed unless FEGLI rates increase. If rates increase, all employees will be affected.

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