Life insurance can be a tricky topic. Every person is different and is in different situations. It’s almost impossible to make any statements or decisions that will apply to everyone. It’s important that you have the insurance coverage that your family will need if something were to happen to you.
Many people assume that federal employees are automatically covered for life insurance through government programs. This is only partially true, as these employees still need to make their own important decisions about their life insurance coverage. If you are a federal employee, it is important to know what your options are so you can make the right life insurance choices for you and your loved ones.
Federal Employee Group Life Insurance
This is actually the largest group life insurance program in the United States, and it covers more than four million federal employees. The plans for Federal Employee Group Life Insurance, or FEGLI, come in three different options: Basic Coverage, Option B, and Option C. There are different amounts of coverage for each, and they are intended for different purposes. Here’s a closer look:
With basic FEGLI, you get life insurance protection that goes up to your base pay amount. On top of that, you can get an additional $2,000. If your base pay is $50,000 a year, for example, you are eligible to get up to $52,000 in basic coverage.
It is also worth mentioning that with the basic coverage options, employees pay the same rates no matter their age. However, those under the age of 35 get what is called an “Extra Free Benefit”, which means that their death benefit can be doubled at no extra cost to them. At age 35 and over, however, this benefit is reduced annually by 10 percent until the employee turns 45 (at which point there will be no “Extra Free Benefit” left).
This option is paid for entirely by you, the employee, although its actual cost by the end will be more than what you pay now, since it increases with age. With it, you choose anywhere from between one and five times your base pay, meaning if you earn $50,000 you are able to select one of the following coverage amounts: $50,000, $100,000, $150,000, $200,000, or $250,000. This option is best if you are interested in more coverage than what you would be able to get with basic, although you do of course have to consider the fact that you’ll be paying more for it.
This third option is not actual life insurance coverage for you, but rather for your family members. With it, you can get life insurance for your spouse or children under the age of 22, providing they are unmarried. However, the coverage amounts for them are going to be a lot less than what you can get. For your spouse, you can select between $5,000 and $25,000 in life insurance coverage, and for your children, you can get up to $12,500. As with Option B, the rates you pay for Option C are also going to increase with age.
Converting FEGLI Policies
Once your group life insurance comes to an end, you are able to convert your FEGLI policy to an individual policy. However, you can only do so within certain timeframes. For example, if you are terminated you have 60 days to convert your policy, after which you will no longer be able to do so.
To give you a better idea of what insurance rates are like with FEGLI, here is an example based on a real-life situation (you can easily do your own calculations on the FEGLI website):
Let’s say John is a 50-year-old federal employee who is currently making $50,000 a year. Depending on which option he chooses with FEGLI, he gets the following:
- Basic: $52,000 in coverage at $19.93 a month
- Option B: $250,000 in coverage at $90.43 a month
- Option C: $25,000 in coverage for spouse and $12,500 for children at another $10.20 added on per month
Now, if John is 55 or older, the cost of coverage spikes (as it does every five years). Say he would be paying $100.23 total at age 50. At age 55, it would rise to $163.70 a month. At age 60, that would go up to $399.65.
The truth is that you can often save money in the long run if you purchase an individual plan, particularly a term life insurance policy. This will make it possible for you to lock in a certain amount of coverage for a long period of time without having to pay increasing rates.
For example, a 60-year-old federal employee could get $250,000 worth of coverage for only $62 a month for a locked in 10-year term period (for 20 years, it would be around $113 month). It is true that everyone’s rates vary based on a number of factors like age, health condition, gender, etc., but overall, individual term life policies tend to be a lot cheaper than FEGLI, and they offer the same amounts of coverage.
There is nothing wrong with getting additional coverage through FEGLI, but in just about every case, it isn’t going to be the cheapest option.
There are several ways that you can save money on your insurance coverage. Having life insurance is the best decision that you can make for your family. You can’t put a price tag on the peace of mind that life insurance will give you.
Getting Cheap Life Insurance
When you’re shopping for additional coverage to go with your FEGLI insurance plan, or you want an alternative, we can help guarantee that you’re getting the cheapest coverage on the market. Making a few simple changes could help you keep hundreds of extra dollars in your pocket.
If you’re listed as a smoker on your insurance application, you can expect to pay much higher premiums, because you pose a greater risk to the insurance company. If you like to smoke, you better like to pay a lot more for your life insurance.
Before the insurance company approves your application, you’ll have to take the medical exam, and the results are going to impact your premiums. Better results, better premiums. Starting to get regular exercise and sticking to a healthy diet could save you hundreds of dollars. If you want to save money, lace up those tennis shoes and hit the gym.
Unlike a traditional insurance agent, independent agents work with a handful of agencies. Every insurance company is different, they all will give you different rates based on your specific situation. Before you decide which company is best for you, it’s important that you get dozens of quotes. Finding the perfect company could be the difference in getting an affordable plan or having a policy that breaks your bank every month.
FEGLI – What You Need To Know
Everyone is different, there is no “one size fits all” plan that you can buy. If you want to make the search as easy as possible, let us do the frustrating parts for you. You can sit back and let us gather quotes.
Want to know more about life insurance as a federal employee, call us at 888-552-6159. We are happy to answer all of your questions and help you get the best rates.