When it comes to retirement planning, understanding your Federal Employees’ Group Life Insurance (FEGLI) coverage should be a top priority. After years of federal service, many employees face an important question: should you keep your FEGLI coverage, reduce it, or drop it altogether in retirement? As United Benefits, we specialize in helping federal employees make informed decisions about their benefits. This Federal Life Insurance Review in 2026 breaks down how FEGLI works, its post-retirement implications, and when alternatives might make more financial sense.
Understanding FEGLI Coverage
FEGLI is the largest group life insurance program in the world, covering over 4 million federal employees and retirees. Established in 1954, the program is administered by the Office of Personnel Management (OPM) and underwritten by MetLife. The plan offers four types of coverage options — Basic, Option A (Standard), Option B (Additional), and Option C (Family) — each designed to meet different protection needs during and after your federal career.
During active service, employees can elect coverage multiples of their salary under Option B or select family benefits under Option C. However, premiums for FEGLI are age-based, meaning that as you approach retirement, those costs can substantially increase.
FEGLI After Retirement: Key Considerations
When you retire, your FEGLI coverage doesn’t automatically end, but you will face critical decisions about how much coverage to continue and at what rate. Federal retirees typically have three main choices for their Basic insurance coverage:
- 75% Reduction: Your coverage decreases 2% per month after age 65 until it reaches 25% of the original value, at which point you pay no further premiums.
- 50% Reduction: Coverage reduces 1% per month after 65, stopping at 50% of the original value. Reduced premiums continue for life.
- No Reduction: You maintain 100% of your coverage for life, though this option comes with higher ongoing premiums.
These choices directly impact both your retirement income and your beneficiaries’ potential benefit. According to the U.S. Office of Personnel Management (OPM), many retirees are surprised to find how much FEGLI premiums rise post-retirement. For example, at ages 65 and 70, rates for Option B coverage multiples can increase sharply, turning what once felt affordable into a costly deduction from your annuity.
What Happens to Optional Coverage?
The story doesn’t end with Basic coverage. Optional coverages — Options A, B, and C — require careful consideration. Option A provides a fixed $10,000 of additional coverage, while Option B allows for multiples of your annual basic pay, and Option C covers eligible family members. However, these options typically become more expensive the older you get, sometimes increasing as often as every five years post-retirement.
For instance, OPM data shows that rates for Option B and C can increase by more than 100% between age 55 and age 70. It’s no surprise that many retirees consider alternative forms of coverage during this time, particularly if they’re in good health or still need meaningful life insurance protection for estate planning or income replacement.
Evaluating Whether to Keep or Replace FEGLI
Deciding whether to retain FEGLI coverage or seek private life insurance alternatives depends on your personal and financial goals. Some key questions to ask include:
- Do you still have dependents relying on your income?
- Do you need life insurance to cover final expenses or to pay off outstanding debts?
- How does your health affect your ability to secure an individual policy?
- Are your FEGLI premiums sustainable on your retirement annuity?
In 2024, many retirees are finding that private life insurance may offer greater flexibility and potentially lower long-term costs. Rates vary by age and health, but modern underwriting and customizable coverage can present more tailored solutions than FEGLI’s standardized options. According to the Life Insurance Marketing and Research Association (LIMRA), over 40% of consumers who compare employer-based and private insurance find that individual policies can be better aligned with post-retirement needs.
Exploring Life Insurance Alternatives
At United Benefits, we help retirees evaluate all available options. Some alternatives to FEGLI include:
- Whole Life Insurance: Provides lifetime coverage with fixed premiums and potential cash value accumulation.
- Term Life Insurance: Offers affordable protection for a specific period, useful for covering remaining debt or income replacement.
- Final Expense Insurance: Tailored to handle burial and end-of-life expenses with simplified underwriting.
- Indexed Universal Life: Offers flexible premiums with potential for cash value growth based on market index performance.
These policies can offer tax advantages, flexible payment options, and stable premiums — features that become increasingly important when managing a fixed retirement income. We assist federal retirees in comparing FEGLI with leading private insurers, ensuring they understand the trade-offs in cost, value, and longevity of coverage.
Common Scenarios for Federal Retirees
Here are a few practical examples of how retirees navigate their life insurance options:
- The Debt-Free Retiree: You no longer have dependents or large financial obligations. In this case, reducing FEGLI to the 75% option or letting it go altogether could free up retirement income.
- The Family Protector: You have a spouse or children depending on your retirement income. Keeping full or partial FEGLI coverage or supplementing it with private term insurance may make sense.
- The Legacy Builder: You want to leave a financial legacy or cover estate costs. Private permanent coverage might better support long-term goals with fixed premiums and cash value options.
FEGLI and Inflation: What to Watch in 2024
Inflation and changes in federal annuity cost-of-living adjustments have added another layer of complexity. Even modest increases in life insurance premiums can reduce a retiree’s disposable income. OPM’s 2024 premium adjustments reflect broader economic trends, with age-based rates continuing to rise. As such, federal employees nearing retirement should start evaluating alternatives well before their separation date.
When to Reevaluate Your Coverage
It’s wise to review your life insurance strategy at least every few years — or immediately upon retirement. Shifts in health status, family circumstances, or financial goals can drastically affect your insurance needs. At United Benefits, we recommend conducting a full benefits review to ensure your coverage aligns with your retirement plan, rather than draining it.
Final Thoughts
Your life insurance decisions after federal retirement can have long-lasting repercussions for both you and your family. FEGLI offers valuable protection during your federal career, but it’s essential to review whether it still serves your post-retirement goals. By evaluating FEGLI alongside private insurance alternatives, you can strike the right balance between cost and protection.
At United Benefits, we’re dedicated to helping federal employees make confident, informed decisions about their coverage. To schedule a complimentary consultation and explore your life insurance options, call us at 866-558-2121 or visit United Benefits Life Insurance Services. You can also reach us by mail at 3295 County Road 47, Florence, AL 35630.
Retirement is a time for peace of mind — and that starts with understanding, and optimizing, your life insurance benefits.