Mason & Associates, LLC

Federal Employees’ Group Life (FEGLI) - Option B

Federal Employees’ Group Life Insurance (FEGLI) - Option B

John M. Mason®

Federal Employees’ Group Life Insurance is a benefit available to active and retired federal employees.  Unlike many private sector group insurance policies, federal employees are able to continue group life insurance in retirement, assuming they’ve satisfied the requirements to maintain coverage.

FEGLI consists of four parts:

  1. FEGLI Basic
  2. FEGLI Option A
  3. FEGLI Option B
  4. FEGLI Option C

FEGLI Option B provides active federal employees the ability to purchase one to five times their pay of additional life insurance. New (recently hired) federal employees have the ability to elect five times their pay in additional coverage WITHOUT medical underwriting within the first 60 days of hire. The additional insurance can be requested at any time after the 60 day window, but will require medical underwriting and the participant must be insurable. Unlike, Federal Employee Health Benefits (FEHB), there is no annual enrollment period or open season for FEGLI.*

*FEGLI Open Seasons are few and far between.  Recent FEGLI Open Seasons occurred in 2016, 2004, 1999 and 1992.  FEGLI Open Seasons provide the ability for active federal employees to sign up for maximum insurance without providing evidence of insurability. Unfortunately, the government did an extremely poor job at advertising these events and failed to educate federal employees of the benefits and uniqueness of these events.

FEGLI Option B premiums are based on:

  1. Amount of life insurance purchased (total death benefit)
  2. Age of the employee - 5 year age brackets

Cost per thousand of FEGLI Option B

FEGLI Calculator

The premiums for option B are relatively inexpensive early career but start to increase substantially as federal employees move through the five year age brackets, specifically at age 45. It’s imperative that federal employees have a comprehensive financial in place to determine how much insurance is required and to determine how long the coverage must be maintained.

After determining the amount of insurance and duration required, federal employees must then select an insurance policy that best fits their financial plan.  In general, Mason & Associates is a fan of term life insurance. We like term life insurance because it allows our clients to have a higher death benefit with a lower premium as compared to permanent insurance policies. The premium savings allows our clients to allocate dollars that would have been spent on expensive permanent policies to other goals such as retirement, college education, family vacations and etc. Our comprehensive financial planning process includes a survivor analysis pre and post retirement. The majority of our clients do not need a permanent life insurance policy because they elect FULL survivor benefits on federal and military pensions. Committing to survivor benefits at the early or mid-career level allows our clients to focus on purchasing inexpensive term insurance while accumulating retirement assets as quickly as possible.

Our early to mid-career clients, especially those with children, still have a need for life insurance even if for a temporary time.  Although FEGLI Option B (one to five times salary) is an option, it’s likely not the best option if clients are able to obtain an individually underwritten policy for several reasons:

  1. FEGLI option B premiums increase every 5 years, regardless of health.
  2. Term insurance premiums are fixed for the duration of the term.
  3. FEGLI Option B premiums continue to increase in retirement up to age 80.
  4. Term insurance policies typically have conversions - we will write a future blog post on this.
  5. FEGLI coverage is tied to employment and retirement eligibility.
  6. FEGLI B coverage is limited to a maximum of five times annual compensation.  In many circumstances this is not enough life insurance.

Action:

If enrolled in FEGLI Option B, consider:

  1. Meeting with a Certified Financial PlannerTM to develop a comprehensive financial plan and survivor analysis
  2. Replacing FEGLI Option B with a term life insurance policy
  3. Attending a retirement seminar and learning about the benefits of electing FULL survivor benefits on federal and military pensions at the early to mid-career level
  4. Using the FEGLI Calculator to estimate monthly or bi-weekly premiums as you move through the age brackets 
  5. FEGLI Basic, Option A, and Option C elections should complement your decision with FEGLI Option B and your overall financial plan.

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