FEGLI RATES
Is FEGLI Right For You, Right Now? By Carol Singer
Is FEGLI Right For You, Right Now?
By: Carol Singer
When it comes to the FEGLI, there are some common questions that arise time and time again but perhaps none quite as much as ‘is it the right time in my career/life for FEGLI?’. In truth, there’s no definitive ‘yes/no’ advice we can provide here, but we can suggest three considerations to help make your decision that little bit easier.
- Firstly, do you believe that you are healthy enough to qualify for individual coverage? When thinking about this factor, you should consider your habits, age, health, lifestyle, etc.
- Secondly, what’s your timeframe in the coming years? Normally, federal employees will get priced out of FEGLI coverage as they age and as FEGLI Rates rise dramatically, so what stage of your career have you reached?
- Thirdly, what are you trying to protect with a potential policy?
The Federal Employee Group Life Insurance, shortened to FEGLI, is advantageous for many federal employees since coverage can be obtained without the worry of medical underwriting. If you’re still early in your career, it’s also quite easy to get a competitive death benefit. However, it isn’t all roses with FEGLI coverage because the premiums steadily increase over time and everybody pays the same rate (the flip side of having no individualism with underwriting). This means that healthy FEGLI participants will be charged the same higher rates and unhealthy participants. So if you are healthy enough to get individual coverage you should seriously consider less expensive FEGLI alternatives.
Potential Benefits of Private Life Insurance vs. FEGLI
If you were to assess the private life insurance market, there are also pros and cons because coverage is more flexible with various riders and underwriting…but the medical underwriting may force you to pay higher premiums if you are unhealthy.
Surviving a Health Scare – If you were suddenly struck down with a heart attack, cancer, or even a stroke, your ability to obtain life insurance would be difficult and the expenses would go sky-high. Therefore, ‘living benefits’ – benefits you can access while still alive – can be an excellent way to replace your income and stay afloat in the short-term. With private insurance, an Accelerated Living Benefit rider could allow you a certain percentage of your benefit early. On the other hand, the FEGLI offers you nothing which leaves you scrambling around with your TSP for much-needed funds.
Considering you have been working hard to contribute to your TSP year-after-year, to think it could all disappear in a matter of months on medical bills and replacing your income is quite worrying. Just because of a health problem, you lose your nest egg, and this is before we even mention taxes and a penalty for withdrawing from your TSP early.
With life insurance, the question for many years was ‘what if I were to pass away?’ However, this is quickly being replaced with ‘what if I live after a health issue?’. Nowadays, technology within the medical industry is growing rapidly, but the cost of medical care is increasing even faster which is putting families into debt every single day.
Do I Need FEGLI?
With any type of insurance you purchase, whether it’s life, travel, homeowners, or health, the idea is to protect something of value just in case something were to happen or go wrong. Ultimately, this is why life insurance is a personal choice and different for every individual in the world. Normally, you can decide with your family the main concerns and how you want to protect them.
If insurance was free to everyone, there’s no doubt we’d be taking policies against cardboard box injuries, asteroids, and everything in between. Perhaps even more efficient, if we could see into the future, we would know exactly what insurance was required (or we could prevent the problem from happening in the first place). Unfortunately, neither of these options are available because insurance costs money and we haven’t developed time machines. Therefore, the answer to the all-important question of life insurance should be answered by looking for flexible coverage at an affordable price.
Within the industry, insurance will typically be limited in the amount of triggers they have, so finding an inclusive policy such as this is easier said than done. If you were to ask a federal retiree whether they managed to purchase cancer insurance after forking out for the FEGLI, FEHB, and FLTCIP, you wouldn’t get much of a response. Even if they were lucky enough to buy cancer insurance, then what happens if they have a heart attack; nothing because the wrong trigger was set and money has been wasted.
Rather than buying insurance policies with a single trigger, it will always be more efficient to find coverage with many different benefit triggers.
FEGLI Candidates – With all of this information in mind, who does the FEGLI suit? First and foremost, Death Only Insurance will be the cheapest option for those aged under 45 years. If you are already past this age, the five-year increases have already started, and the Basic Extra Benefit has ended. Therefore, private insurance starts to become more competitive (this is helped by the addition of living benefits).
After this, FEGLI may still be an option if you have a health condition since there is no medical underwriting. If the issue is serious, private insurance companies will take this into account and raise all premiums.
With the FEGLI still around today, this alone shows that it has a place in the industry and it helps thousands of people. This being said, it is very generic in that everybody pays the same regardless of his or her health, smoking habits, and every other factor that normally plays a role. In the same breath, the price increases will apply to everyone regardless of the same factors.
Key Questions – Before we go, we want to provide you with some key questions you need to ask before making a decision;
- Will underwriting be a problem if I go for personalized coverage privately?
- Can I pass the underwriting in a few years’ time if I were to wait?
- What exactly do I need to protect? – For most, the death benefit will replace income, pay for a funeral, and ensure their families can continue their current lifestyle while adjusting to your passing.
- Will my need for insurance be removed in the next decade or two? – For example, will you finish paying a mortgage or will your children leave education?
- Have I got cash reserves to act as living benefits?
All things considered, the best thing for you to do right now is to assess your position. The longer you wait, the more FEGLI becomes unattractive, and you are forced into private insurance which can be damaging if you have a health issue. If you need help with this decision, be sure to discuss your position with a finance expert for unique advice!
Contact Carol:
Phone: 505.310.1474
Email: [email protected]
Other Carol Singer Articles
Obtaining the Best Federal Employee Life Insurance by Carol Singer
Don’t Fall For FEGLI Discounts
First published on CompareFegli.com
Don’t Fall For FEGLI Discounts
and Postal Service workers enrolled in the Federal Employees’ Group Life Insurance (FEGLI) program to shop around for savings or look for other similar life insurance products that give them the same protection and cover at a lower price.
But while doing so, it’s important to know that you cannot get any FEGLI discounts from any other insurer, or buy any supplemental insurance products that will lower your FEGLI rates and premiums.
FEGLI Discounts are unavailable because premiums are calculated based on government-wide rates and factor in your age, salary and individual enrollment in FEGLI options. Read More…
Other related articles
What is FEGLI Option A, Option B and Option C?
Evaluating your life insurance policy by Todd Carmack
Converting FEGLI to Individual Life Insurance After Separation From Federal Service
SCOTUS Ruling Clarifies FEGLI Designation of Beneficiaries
First Published On CompareFEGLI.com
Supreme Court Ruling Clarifies FEGLI Designation of Beneficiary Issues
A recent U.S. Supreme Court ruling has provided some clarity about Federal Employees Group Life Insurance (FEGLI) designation of beneficiary issues.
The case in question (Hillman v. Maretta; case No. 11-1221) was about a dispute over a deceased federal employee’s FEGLI proceeds. Both his ex-wife and his wife at the time of his death laid
claim to .
The problem was that a Virginia statute revokes a beneficiary designation in any contract that provides a death benefit to a former spouse where there has been a change in the decedent’s marital status.
But at the time of his death, Warren Hillman’s beneficiary of his FEGLI life insurance policy was still his ex-wife Judy, now Judy Maretta.
It seems that after their divorce, Hillman had neglected change his named FEGLI beneficiary to his new wife Jacqueline Hillman. So the FEGLI life insurance benefits should have gone to ex-wife Judy as per federal law, but Virginia law automatically transfers the benefits to his wife Jacqueline.
After Hillman’s death, Judy Maretta filed a claim seeking the FEGLI life insurance benefits and successfully collected said benefits. Jacqueline Hillman then filed suit in a Virginia state court, seeking recovery of the proceeds.
Hillman v. Maretta Case About FEGLI Designation of Beneficiary
The legal arguments and constitutional questions raised by the case ended up pitting Virginia state law against the Federal Employees Group Life Insurance Act (FEGLI Act) of 1954.
The Virginia Circuit Court found Maretta liable to Hillman, and the appeal ended up in the State Supreme Court which reversed the verdict and upheld FEGLI Act over Virginia state law. The U.S. Supreme Court has now endorsed this ruling, so Section D of Virginia state law stands preempted by FEGLI Act.
This verdict is about FEGLI life insurance proceeds, but it will now serve as a reference for just about any type of case where state and federal law are in conflict over federal employee benefits and designation of beneficiaries.
More FEGLI Articles
Let’s Talk Federal Employee Life Insurance (FEGLI)
Federal Employees Life Insurance – FEGLI.
This is really great stuff. Ever so often I talk about being inspired by a conversation or a question I have been asked. I don’t know why I deserve so many flowers. Each time I am inspired by someone, I consider it a flower, a rare and precious gift because that what being gifted with knowledge is. Today I was coaching a Federal employee about her FEGLI coverage and received the most wonderful gift from her when she said, “Now I am a full grown woman and this is the first time in my life that life insurance has really been explained to me.”
I was happy she had gotten what she needed, but disappointed that my profession, Human Resource Management of which benefits fall, had not done its job. I am very sensitive about the role of Human Resources and its awesome responsibility to a workforce. It is the Office of Personnel Management (OPM) that is charged with human resources oversight for the entire Federal Government. It is not the State Department or Treasury. Those agencies have another mission. So when employees tell me that Human Resources has not filled in the knowledge gaps about their benefits, I get a little concerned.
The Federal employee who is one of the best strategists I have ever met, wanted to know the difference between term and whole life insurance. That’s a great question since the Federal Government offers term life insurance (FEGLI) as a part of the Federal benefits package. We had some light banter about what could be done to ensure employees had enough information about their benefits to make informed decisions. I suggested employees engage Human Resources offices more, inundate them with questions. She said what good will it do if they don’t know the answers to my questions. She further stated that the Federal Government lost a lot of institutional knowledge about 20 years back when a number of highly-trained HR specialists retired.
I am not going to agree or disagree with that premise. I will say that the employee’s premise is one of the strongest arguments I have heard to support the extreme importance of effective succession planning. Employees in organizations are supposed to be like perpetual revolving doors. As one leaves and another enters only the body is vacating the premise, it should not be the knowledge required to do a job and the guaranteed continuity of service provision that is vacating the premise. People are not indispensable, they just aren’t and it benefits no industry to act as if they are.
All employees should be respected in the workplace and treated with a great amount of dignity. Employees should be applauded for their skills and abilities and rewarded. However, no single employee should be in control of the conch (shell) as in the novel, Lord of the Flies. The conch represented order and structure. Having knowledge begets order and structure. When employees do not have the prerequisite knowledge, order and structure is at risk so evident when people leave organizations having not properly passed the torch of knowledge. The civilization is left in disarray and order and structure is sacrificed.
We look to the Federal Government for order and structure. Therefore, Federal employees must not accept the rationale that the people who knew the information are gone and all is lost, but must demand that information keeps flowing no matter who leaves the beach. I got the opportunity in the end to tell her very precisely the difference between term life insurance and whole life insurance. Very simply I told her that term life insurance tends to be less expensive than whole life and it does not have a cash value, Most importantly, its value decreases with age, except if you choose a no reduction option in your federal benefits. Whole life insurance has a cash value and can be more costly. It is better to get insurance when you are young because the older you are, the more premiums tend to cost because of risk associated with aging.
She also asked if she should purchase the Government’s long-term care (LTC) insurance. I told her that LTC becomes pretty pricey after age 50. I suggested she be a wise consumer and check costs on the open market, compare rates with what the Feds are offering and make a decision before age 50. I am most willing to share information because that is what my profession dictates. However, individual choices are just that. You should only make decisions based on whether it is a fit or not.
P. S. Always Remember to Share What You Know.
Dianna Tafazoli
Recommended Articles
For Postal Employees – LiteBlue and the TSP
Federal Retirement Benefit Analysis
Is The Pension Survivor Benefit Best For You? by Todd Carmack
A Little-Known Opportunity Can Increase Your Retirement Income. by Mark Sprague
Understanding Your FEGLI Coverage, by Todd Carmack
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
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
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
FEGLI Option B is 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
FEGLI Option C is 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.
About the Author
Todd Carmack
Arizona
Other Todd Carmack Articles
Understanding The Thrift Savings Plan, by Todd Carmack
Social Security for FERS Employees, by Todd Carmack
Is The Pension Survivor Benefit Best For You? by Todd Carmack
Disclosure: BWM Advisory, LLC reserves the right to edit blog entries and delete those that contain offensive or inappropriate language. Content will also be deleted that potentially violates securities laws and regulations. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. All investment strategies have the potential for profit or loss. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours. BWM Advisory, LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
Postal Retirement – Preparing the Workforce
Preparing for Postal Retirement
The Postal Service has several programs designed to secure upward mobility for its workforce. There is an Advanced Leadership Program, an Associate Supervision Program, a National Center for Employee Development and a Managerial Leadership Program and an online platform to access your benefit information and make certain elections, LiteBlue.usps.gov. All of these programs are designed to help the Postal Employees grow in their career and prepare for retirement.
Each program, from LiteBlue to the Thrift Savings Plan, is designed to help and to develop a workforce of excellence, equipped with the knowledge, skills and abilities to implement operations required by high-tech equipment and practices necessary to carry-out the complex work of the Postal Service and to retire comfortably.
In order to reach the Postal Service’s large and multi-jurisdictional workforce, the service uses a plethora of e-learning tools and other technology to train its employees. The Postal Service’s training profile is designed to recruit and train program leaders and managers up to the executive level of operations.
An unfortunate reality, however, is the fact that the USPS has chosen to remove most HR functions from local Post Office with the creation of the Shared Services. The need for direction, therefore, on HR and Retirement related questions often falls to potentially untrained individuals at your Station and word of mouth recommendations. The need for financial professionals has never been more important to the Postal employees and soon to be retirees because of the demographic shift and the aging of the workforce, along with the ever increasing complexity in TSP funds and recommendations, FEGLI comparisons and ways for these employees to protect their lifestyle and financial well-being in retirement.
If you’re a Postal employee and have questions on your benefits and postal retirement, PSRetirement.com can provide you with introductions to local FERS, CSRS, TSP and FEGLI experts and may be able to facilitate a free Benefit Analysis for you and members of your office or Local Union looking for direction or help. Regardless of where you turn, make sure that you are getting the information you rely upon from a competent expert in your complex benefit and retirement options.
Information on the unique benefits for Postal Employees is also important to understand
Other Postal Retirement and LiteBlue Related Pages
What Postal Employees Should Do On LiteBlue Before Retirement
Changing Your LiteBlue / PostalEase Password Through ssp.USPS.gov
eRetire for Postal Employees – Retirement Applications on LiteBlue
Use LiteBlue to Manage your FEHB
You can use LiteBlue and PostalEase to manage your Allotments
Requesting Duplicate Postal Employee W-2 Forms Using LiteBlue
FEGLI – Conversion
FEGLI Conversion
The term conversion is when a policy is converted (changed) into another type of policy, i.e. from a group life insurance policy to an individual policy without undergoing a physical examination to qualify. If you are a Federal or Postal Employee you will need to understand how the term ‘Conversion’ relates to FEGLI.
Your coverage as an employee ceases when you resign, complete 12 months in a non-pay status or when you retire. Regarding any of the above conditions, if you need life insurance, you can consider converting to a non-group individual policy and you will not have to be given a physical examination to qualify. With FEGLI (watch the video) this is challenging due to the typicaly costs associated with the new ‘converted’ policies available. If you are healthy, you would typically be better off Comparing your FEGLI on the internet or with a qualified FEGLI expert against the open market to determine the best option available for you and your family.
You may also want to convert to avoid the Mandatory Reduction in FEGLI Option A that commences upon reaching age 65 and you are retired. You can also choose to continue your Basic insurance into retirement and convert some or all of your optional insurance.
It should be noted that if you assign your insurance, you forfeit the right to convert your coverage leaving that privilege open only to the assignee. We will talk more in upcoming posts about Assigning your insurance.
Having a good understanding of FEGLI will assist you and your family in planning for and taking care of the final business of your life.
P. S. Always Remember to Share What You Know.
FEDERAL RETIREMENT INFORMATION
For more information federal and postal Retirement Planning
Additional FEGLI information HERE
For access to your TSP.gov login
Postal employees can access their LiteBlue.usps.gov account from here
