Obtaining the Best Federal Employee Life Insurance by Carol Singer

Carol Singer discusses the importance of finding the best life insurance (Hint: it isn’t always FEGLI)

With so many different options on the market nowadays, life insurance can be a confusing topic (to say the least), especially for Federal Employees. As you may know, Federal Employees Group Life Insurance (FEGLI) only requires public sector workers to pay two-thirds of coverage while those in the private sector are required to pay 100%. Furthermore, private life insurance rates will depend on one’s health, which is different to FEGLI coverage where everybody within the same age bracket pays the same amount.

 

With this in mind, those who are healthy may feel as though the insurance is costly because they are paying the same amount as those who are not quite so healthy. In addition to this, FEGLI Option B and FEGLI Basic will both increase in line with adjustment to your salary no matter how healthy you may be; Option B covers you for between one and five times your yearly salary.

 

As you may know, Option B and Option C are also available, and these protect your partner and children. If you get married/divorced or if you gain/lose a family member, the two can be adjusted accordingly without having to prove insurability. With FEGLI Option C in particular, this is helpful for those who cannot get private life insurance; for example, those who have a health condition or are slightly older than private companies allow. This being said, coverage will never rise above $25,000 which can be quite limiting.

 

What Should You Do? – If we use all of the information above, the best step to take moving forward is to re-evaluate your life insurance options in five-year periods. Why? Because in this time, your insurance needs may have changed somewhat due to a big life event. If your children have completed college, you will not require the same levels of insurance now than you did back before college. Furthermore, you may have paid the mortgage, and this will allow you to reduce the coverage again. If you get married or divorced, regular assessment gives you an opportunity to adhere to your needs for the next period of your life even if it is a simple change in beneficiary.

 

Regardless of your hobbies, FEGLI will always keep you covered, but it becomes incredibly expensive as you age.  Once you reach a certain age, it is almost always advisable to begin reviewing the cost of your FEGLI against private market comparisons.  You’ll likely find that, as long as you are reasonably healthy, you can receive some very attractive benefits from an Indexed Universal Life (IUL) insurance policy or lock in much lower costs by using a fixed Term Insurance policy (for, say 20 or maybe 30 years) vs. continuing with FEGLI into retirement.

 

As long as you have the coverage for at least five years before retiring, you may maintain FEGLI Option B even after retiring. By having this in place, your partner can replace your income with this amount if you were to pass away before them. If we say you have five times your salary ($64,000 x 5 = $320,000) of coverage for option B, the cost would be just under $140 per month. After turning 60, this doubles and then increases yet again every five years until you reach 80, and this is important to consider.  This is why we highly recommend that you consider comparing your FEGLI policy against cheaper alternatives.

Facts About FEGLI

• FEGLI becomes very expensive as you age.
• Unfortunately, there is no way to take out a loan against your FEGLI policy.
• Since it is a group life insurance policy, there’s no way to build a cash value.
• In every circumstance (except the beneficiary causing your death), the beneficiary will receive the death benefit if you pass away.
• There are no refund options for FEGLI if you choose to cancel.
• With the living benefit in tow, you can receive early payments if you happen to come down with a serious illness.
• For no extra cost, accidental death and dismemberment is included within the insurance itself.

Contact Carol Singer:

Phone: 505.310.1474

Email: [email protected]

 

Other Carol Singer Articles

The Correct Way of Saving for Retirement by Carol Singer

Is FEGLI Right For You, Right Now? By Carol Singer

Five Key Steps Towards Federal Retirement and Financial Security by Carol Singer