FEGLI Option B - United Benefits

FEGLI Option B


Linda: Our FEGLI Option B, this is the five times your pay. Explain that to me.

Jeff: That’s right. Well first of all, you have to have the basic in order to have this, just like all the options. But this will allow you to do up to one to five times your salary. And this is really based off of term insurance. The reason you would have this is if you needed term insurance. And basically, like I said, it’s one to five times. They round your salary up to the nearest thousand. And in this example, times five, that’ll give you the amount of $425,000.

And this is a five-year renewable term. So that means every five years, your cost will increase. So basically, let’s look at this chart. And if your birthday ends in a zero or a five – or your age, anyway – every five years, that’s when it goes up. And it’s not that bad. The younger you are, it’s not that bad, but as you age it gets very expensive.

Linda: I see at age 60 it jumps up pretty significantly.

Jeff: Yeah. Even at age 55, that’s when it almost doubles. And it more than doubles at 60. So that’s when it gets very expensive. Before you retire, you must choose an option on this. So if you choose the full reduction, which is the default setting, unlike the other two options that we looked at, they reduce 75%, this will reduce 100%. So you do not maintain any portion of this for free.

Linda: Why is it important to have my Option B while I’m working?

Jeff: Well, you may have a family or a mortgage on your home. So that’s just really the purpose of term insurance, to cover you while you need it. And if you wanted to maintain your full coverage, if we look at that far right column on the no reduction, the cost will still increase every five years until you’re age 85.

Linda: Wow. So you’re telling me a monthly cost is going to be $2,860.00 at age 80.

Jeff: That’s right, Linda.

Linda: That’s crazy.

Jeff: That is an arm and a leg.

Linda: So what can I do to save money?

Jeff: Well, what we recommend on this, if you’re paying for this because you need it, we can certainly save you money by locking in a term policy. Now let’s look at this. If you’re a, while you’re working, Option B, no reduction cost. If you continue to pay for this into retirement, look at the cumulative cost there. Over $128,000.

Linda: Wow.

Jeff: All right, let’s see how we could help on that. Now let’s look if you lock in a 30-year term at age 45 with United Benefits, and we have two different rates right here. We’re showing a standard and a preferred, and that basically depends on your health, on what price you’re going to get. Obviously the healthier you are, the better the price is. But either way, you lock in the price and it does not change for 30 years. So there’s no rate increases.

Linda: Okay. That’s nice.

Jeff: So look at this. Over 30 years, you’re talking about saving between $90 and $105,000.

Linda: For the same amount of coverage.

Jeff: For the same amount of coverage.

Linda: If I get the coverage today, at 45.

Jeff: That’s right. And that’s the key. The sooner you do it, the more you save.

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