As a benefit counselor and retirement income specialist, I have come to realize that a lot of employees do not remember what they signed up for or understand their federal employee group life insurance (FEGLI) coverage.
Basic FEGLI Coverage – if elected, FEGLI Basic coverage provides a death benefit based on your gross salary, rounded up to the nearest thousand and then $2000 is added to that figure. Example, if you make $51,486, your death benefit would be $54,000. At age 65, Basic FEGLI coverage becomes free and the coverage will reduce down by 2% per month until it reaches an ultimate reduction to 25%.
Employees do have the option to elect NO FEGLI Reduction or a 50% FEGLI Reduction. If elected, there is a premium payment required to maintain your FEGLI coverage.
FEGLI Option A – is a flat $10,000 death benefit. At age 65, coverage is free and will reduce by 2% a month until it reaches $2500.
FEGLI Option B – this optional FEGLI coverage provides 1,2,3,4,or 5 times your annual salary as a death benefit. Example – if your salary was $51,486, and you chose 5 times your salary, your death benefit would be $260,000 ($52,000 x 5). This option can become very costly after the age of 50. The cost or ‘premium’ paid to maintain FEGLI almost doubles every 5 years. At age 65, you may elect to reduce coverage by 2% a month for 50 months until it reaches 0, or continue to pay premiums.
Because of the higher premium costs after age 50, it may be in the employee’s best interest to consider looking for a level term insurance plan in order to reduce the monthly premium over time. A great resource I’ve found for reducing your FEGLI expense is www.CompareFEGLI.com.
FEGLI Option C – this optional coverage provides a death benefit for your spouse and eligible dependent children (under age 22). There are multiples of 1-5 available. The FEGLI coverage amount is increments of $5000 for spouse and $2500 for each child. Example – if you chose a multiple of 3, there would be $15,000 of coverage on spouse and $7500 coverage on each child.
At age 65, you may choose to reduce coverage by 2% per month until it reaches 0, or continue to pay premiums.
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