The Good, The Bad and the FEGLI
By: Kevin O’Leary
The Federal Government Group Life Insurance Program, also known as FEGLI, is considered to be the largest group life insurance program in the world. This coverage plan provides life insurance protection to more than 4 million Federal employees and retirees, along with many of these individuals’ family members.
There are a number of nice advantages to being a FEGLI participant. First, most Federal employees are eligible. This means that even with certain pre-existing health conditions that would deem an individual unacceptable for an individual life insurance plan, coverage is available – allowing for peace of mind in that loved ones will have at least some amount of benefit to pay off debts and / or to replace lost income.
In addition, the cost of the coverage is shared between the participant and the U.S. Government – with Uncle Sam paying for 1/3 of the premium price. This can equal a nice percentage discount on this necessary benefit.
Yet, while the FEGLI program is extensive and offers some nice perks, there are also a few drawbacks to be aware of. First, the coverage that is offered is term life insurance. This means that the benefit provided consists of pure death benefit protection, without any type of cash value or investment build up. Therefore, if individuals want to also participate in a long-term tax-deferred savings program like you can get through permanent life insurance policies, they will need to do so elsewhere.
In addition, while the price of term life insurance coverage is typically very affordable for those who are young and healthy, the price tends to increase substantially over time. This is especially the case as an insured reaches his or her 50s, 60s, and beyond. Unfortunately, this is oftentimes when people need life insurance protection the most.
Therefore, for Federal Employees’ Group Life Insurance Program participants who wish to remain covered in their older ages, there are essentially two options. First, be prepared to pay a much higher premium over time if remaining in FEGLI, as the cost of your term life benefits continue to increase.
Alternatively, you could purchase an individual permanent life insurance policy at a younger age and lock in the premium for this coverage for the remainder of your life. This way, you will be ensured of having that policy for life – regardless of your age or health condition – as long as the premium continues to be paid. You will also be able to build up tax-deferred savings – another added benefit with this type of life insurance plan.
More about Kevin O’Leary
Kevin O’Leary is a Federal retirement expert who works out of his Southern California office, but helps federal employee clients throughout the country. Kevin O’Leary is a regular contributor to PSRetirement.com and Kevin O’Leary is a highly sought after speaker and advisor on federal retirement benefits.
You can reach Kevin O’Leary
Gov EB Network
30300 Point Marina
Canyon Lake, CA 92587