The pandemic has made two things clear: First, no one is free from uncertainty and the many effects, financial and otherwise, uncertainty can introduce. Second, there’s nothing more important than family.
The additional challenges of living in a COVID-19 world have led many of us to reassess our priorities and prepare for uncertainties. It makes sense that protecting your family from uncertainty with life insurance has emerged as a top priority.
Why reevaluate your life insurance needs if you’re covered under FEGLI?
The Federal Employees’ Group Life Insurance (FEGLI) program provides group term life insurance to most federal employees. Enrollment in the “Basic” level is automatic for eligible employees, and additional coverage can be added, all of which makes it easy to get this compelling benefit.
Even so, federal employees shouldn’t assume that FEGLI provides the right amount of life insurance coverage to fit their needs throughout their career. It’s not unusual for people to have too little life insurance coverage. People who only have group term life insurance through their employer, on average, have $225,000 less coverage than they actually need.
Part of the reason for this kind of shortfall is that under FEGLI, as with most employer insurance programs, the Basic level of coverage is based on and limited by your salary. While your salary may be enough to live on now, it’s probably not the coverage your family will need while dealing with a loss. Especially if you’re part of a two-income household, FEGLI coverage may fall far short of necessity.
When should you reevaluate your life insurance needs?
Getting married or moving in together
Although the U.S. marriage rate reached an all-time low in 2018, about half of adults are currently married, half of whom rely on two incomes. It’s not just married couples who depend on each other financially. More and more, people live together without being married, sometimes for many years — and 38% said they made the decision to cohabitate because it made financial sense.
Buying a house
Owning a home is a dream for many, but attaining that dream often comes with long-term financial obligations. About 63% of households have a mortgage, with the average mortgage reaching a record high of $354,500 in 2019. Mortgages are second only to credit card balances in the types of financial debt that can get passed on to your estate. While just 7% of people who have debt expect to die in debt, 73% of Americans actually die in debt.
It takes a village — and a lot of money — to raise a child. The most recent calculation puts the cost at $233,610 through age 17. Add in college, and a family’s financial needs rise. Even with a small dip in college expenses during the pandemic, tuition alone averaged $9,687 for in-state public college and $35,087 for private college for the 2020-2021 academic year.
Getting a divorce
While 39% of marriages end in divorce, that doesn’t necessarily mean the end of financial responsibilities. Alimony and childcare support can continue long after the marriage is over. Depending on the settlement agreement details, life insurance needs may change, including whether the ex-spouse or children should be the named beneficiaries on the policy.
Planning for retirement means getting ready for financial changes. Depending on your career path, you could be eligible to continue your FEGLI coverage when you retire, or you might want or need to convert it to a new policy. As retirement nears, you may look to maximize your pension by selecting a minimum option for the survivor benefit and using the savings to buy a life insurance policy. If your family relies on two retirement incomes, and one person dies, life insurance can support the surviving spouse through their loss.
Who can help you find the right policy as your financial needs change?
A Chartered Federal Employee Benefits ConsultantSM professional, or ChFEBCSM practitioner, is an expert in all federal employee benefits, including the complicated FEGLI program. A ChFEBCSM practitioner can sort out which features FEGLI lacks that are important to you. You might prefer a policy with more coverage, lower premiums for being in good health, or that you get to keep if you leave federal service for another job.
It’s a lot to consider. A ChFEBCSM practitioner will work closely with you to review your financial situation, assess potential risk, and figure out what life insurance policy makes the most sense for you and your family.
For guidance on insurance and financial planning needs throughout the many evolving stages of your life and federal career, contact The Government Employees’ Benefit Association (GEBA) to work with their team of highly-credentialed financial advisors, each possessing extensive experience with federal benefits. GEBA’s Wealth Management team has over 45 years of expertise in investment and retirement planning, TSP allocations, life insurance, long-term care insurance and personalized financial plans. Learn more about GEBA’s services and premier financial and life insurance products at www.geba.com.
Securities are offered through Cape Securities, Inc. Member FINR A, SIPC. Investment Advisory Services are offered through Cape Investment Advisors, Inc. GEBA Financial Advisors are Registered Representatives of Cape Securities, Inc . Insurance offered through Truchoice Financial. ChFEBC designation offered through www.fedseminars.com.