If you’re a federal employee enrolled in the Federal Employees’ Group Life Insurance (FEGLI) program, it’s important to understand how the costs and coverage change over time. While FEGLI provides essential protection, there are key factors you should consider as you plan for the future. Here’s what you need to know:
1. Cost Increases Dramatically Over Time
One of the most significant drawbacks of FEGLI is the escalating cost. As you age, premiums increase steeply, making the program much more expensive. For many federal employees, this cost spike can strain retirement budgets. For instance, FEGLI’s Basic coverage premiums often rise nearly 650% from their initial rates. This can make it difficult to maintain the same level of coverage you had earlier in your career.
2. Coverage Continues to Adjust Until Age 80
Another critical aspect of FEGLI is that coverage doesn’t stay static. For all options (Basic, Option A, Option B, and Option C), the coverage amount automatically decreases after you reach age 65. The reduction continues gradually until age 80, when the coverage reaches its final level. This means that even though you may be paying significantly higher premiums, the coverage amount you receive may not align with your financial needs later in life.
3. Basic Coverage Costs Nearly Triple at Retirement
For those enrolled in FEGLI Basic, the rate increases are especially sharp. Upon retirement, most employees will see their costs surge to nearly 10 times the original premium. While Basic coverage is affordable during your working years, the retirement premium hikes can quickly erode your financial stability if you aren’t prepared.
4. Dependent Coverage Ends at Age 26
If you’ve added dependent coverage for your children through FEGLI’s Option C, it’s important to note that children are automatically dropped from coverage when they turn 26 years old. At this point, your premiums won’t decrease, but you’ll lose coverage for any child who has aged out. For families, this is a detail that often goes unnoticed until it’s too late to adjust.
Is FEGLI the Best Choice for You?
While FEGLI is convenient for federal employees, it’s not always the most cost-effective or sustainable option—especially as you approach retirement. There are private insurance alternatives that can provide level premiums and consistent coverage throughout your lifetime, often at a lower cost.
If you’re concerned about the rising costs of FEGLI or want to explore other options, now is the time to take action. Reviewing your life insurance plan and comparing alternatives can ensure you’re making the best decision for your future and your family.