FEGLI – Life Insurance for Federal Employees {Here’s How it Works}

If you are in your federal employee and in your 50’s or 60’s then FEGLI might be a great option to give you the life insurance coverage you need.

And then again maybe not. Let’s dive in…

In this article I will give you a basic understanding of what you need to know about how FEGLI works.

What is FEGLI, you ask?

FEGLI stands for The Federal Employees’ Group Life Insurance (FEGLI) Program, a life insurance program administered by the U.S. Office of Personnel Management (OPM) for federal and postal employees.

FEGLI is a group term life insurance policy option provided by Metropolitan Life Insurance Company (MetLife) via a government contract with OPM.

While you cannot build up cash value or take a loan against this insurance, FEGLI does offer you some nice benefits and provides basic life insurance coverage.

The good news is that the majority of federal employees are eligible for FEGLI coverage.

FEGLI was established by the federal government in the 1950s and is now the biggest group life insurance program anywhere in the world.

Today, over four million federal workers and their families, as well as federal retirees, are covered on FEGLI.

FEGLI – How Does The Basic Plan Work?

Federal employees are automatically enrolled for basic life insurance under FEGLI.

In fact, government payrolls are set up to automatically deduct FEGLI premium payments from your paycheck.

If you do not wish to have FEGLI coverage, you do have the option to waive it. Therefore, payroll deductions won’t occur.

Within the first 60 days of becoming a new (or newly eligible) employee, you can enroll in FEGLI or increase your coverage.

If you have a life event, such as marriage, divorce, new birth or death of a spouse, you have 60 days to enroll or change coverage.

FEGLI requires form SF 2817 to be submitted to a human resources office. Many HR offices also have an electronic enrollment system.

You can reduce or even cancel your coverage anytime, and you can also designate or change a beneficiary whenever you would like.

You and the government share the cost of the basic insurance plan.

The government pays one-third, and you, as the employee, pay the remaining two-thirds of the cost. However, if you are a U.S. postal worker, the Postal Service pays for your entire cost of the basic plan.

The basic insurance plan is age-independent, meaning that your cost does not increase as you age.

The basic FEGLI insurance covers you for a Basic Insurance Amount (BIA) of $10,000, or for a greater amount of your annual base pay rate, rounded up to the next $1,000 plus an additional $2,000.

The BIA covers whichever of these two options is greater.

Employees under age 45 have an Extra Benefit that is automatically covered without you paying an additional premium. If you were to die before age 45, the Extra Benefit is there to increase the BIA.

Part of the basic insurance coverage includes accidental death and dismemberment benefits at no additional cost to the employee.

Death benefits are payable if the employee is injured in an accident and dies within one year as a direct result of sustaining the injuries.

The benefit is also payable if you lose a limb or lose your sight in one or both eyes as a direct result of those injuries.

Under the basic plan, accidental death benefits are equal to the BIA without any added extra benefit. Half of the BIA is paid for loss of limb or eyesight.

Optional FEGLI Insurance Options You Can Have

FEGLI offers three optional insurance coverage plans in addition to the basic coverage; federal employees must be covered under the basic plan to elect one of these options.

New employees are auto-enrolled in the basic plan, but not the three options, so you must choose one.

If you don’t elect an option, you are automatically waived and not enrolled in any of these three.

The government will pay one-third of the cost for option A, but employees do pay the full cost of the options B and C.

Furthermore, your cost of the options is dependent on your age.

Here Is How The Three FEGLI Options Work:

Option A is the standard option that provides an additional $10,000 in life insurance.

If you elect option A, accidental death and dismemberment benefits are covered automatically at no extra cost and are equal to your your benefit amount with Option A. For loss of limb or eyesight, the benefit is half of your coverage under Option A..

Option B provides additional coverage above the standard option.

This option allows you to get life insurance in multiples of your annual rate of basic pay. You can elect multiples of one to five on this plan.

Option C is the family option where you can ensure that your spouse and eligible dependent children receive a benefit.

You can elect multiples of one to five on this plan. Each multiple translates to $5,000 for a spouse and $2,500 for each eligible dependent child under age 22.

Options B and C do not have the accidental death and dismemberment coverage.

How Do These Options Stack Up vs. Getting Insurance Outside of FEGLI?

Basic insurance coverage is a great deal. The government pays one-third of the cost, and you can even keep the plan in to retirement. Often times this is the best plan that you’ll be able to find anywhere.

If you are a U.S Postal Worker your plan is even better, because your coverage is fully paid for.

Option B on the other hand is a different story. Option B coverage gets very expensive over time.

When you get over the age of 50 the rates really start to go up a lot. And the rates keep going up every 5 years.

Most people that are in their 50’s and 60’s can get far more affordable coverage than what they have to pay with option B.

Enrollment and Cancellation – Here’s How It Works

In addition to the enrollment options outlined above, federal insurance programs occasionally have open season registration, but these are not on a regular schedule and must be scheduled by the OPM.

The open seasons are typically held for federal health coverage and other policies to give employees and retirees the opportunity to make changes that cannot otherwise be made on a regular basis.

However, because you have lots of flexibility to make FEGLI changes, you should not have to rely on an open season.

You can cancel the basic or optional FEGLI coverage at any time.

Canceling your basic insurance will automatically cancel any optional life insurance you are enrolled in. However, if you cancel an option, your basic insurance will still stand.

Cancellations are typically effective on the last day of the pay period. Your employer/agency will maintain your FEGLI records. OPM will not keep any records for employees.

FEGLI Calculator {Make Sure You Try This}

This is a handy tool that I suggest you take a look at. With the FEGLI Calculator, you can calculate various coverage combinations and calculate the cost for coverage.

It’s a great way to see how selecting different options changes the cost you have to pay for the amount of coverage you receive.

In particular, for people looking for affordable life insurance over age 50, I encourage them to use the FEGLI calculator to see how the cost of life insurance increase over time.

Take a look at the calculator and pay particular attention to option B if you have that. You will see how much the cost for coverage goes up over time.

Summary and Next Steps

I find that in the OPM manual, the details surrounding FEGLI tend to be written in a complicated and complex fashion.

If you have questions on your coverage with FEGLI reach out and give me a call.

And if you have option B and you have reached 50 years of age or older definitely reach out to me.

There’s a good chance I can save you a lot of money by helping you get coverage with a top rated insurance company outside of FEGLI.

And if not, I’ll let you know.