As you may well know, September offered a rare opportunity to enroll in the Federal Employees Group Life Insurance program. Federal employees were allowed to enroll for any of the FEGLI coverage, including family coverage and Option C. There was no need to have a life event to elect coverage, and neither would you be required to answer any health questions.
If already enrolled and you plan to add more coverage, then October is the month. The coverage will take effect on October 1, which will also be when you’ll pay premiums for the news coverage. However, if you want to add additional retirement coverage, you’ll have to wait five years to retire or until October 2022.
If single, you probably don’t need life insurance, except if you have dependents you’ll want to pass it to. However, if married with kids or if you have several people depending on you financially, then the following questions will help you determine the level of coverage you need.
1. What is the value of your FERS or CSRS survivor benefit?
If you are still employed upon your death, there are survivor benefits payable under CSRS and FERS to your spouse, eligible kids, and possibly a former spouse (based on a court order). If you are a retiree, the election was done at the time of your retirement. You can check the value of your CSRS or FERS at OPM Retirement Services Online.
2. Will your spouse receive a survivor’s benefit from Social Security, or will it be only their benefits? (See Social Security Survivor’s Planner.)
3. Do you have other assets like a second home, inheritance, or others that should be considered?
4. Do you have other life insurance policies that are payable? What is your expected additional income?
5. Does your spouse have his or her own retirement income?
6. Have you discussed what will happen to your retirement funds if one of you dies?
7. How much will your retirement expenses change if one of you predeceases the other?
Can you restore your CSRS or FERS retirement to its unreduced value if you elected to provide a survivor annuity? Can you change from Self Plus One to Self-Only coverage?
It can be tough to cancel life insurance coverage that you have been paying for a long time. Still, it’s essential to consider the cost of the coverage and other possible areas where it could be spent.
The cost of FEGLI Option B increases with age, but it’s not your only option. Basic FEGLI is the coverage you’ll want to maintain throughout your federal career. It’s valued based on your current salary (rounded up to the nearest $1,000 plus or $2,000), and the price is a bi-weekly payment of $.15 per $1,000 of coverage.
Employees of age 35 and younger are covered with the Extra Benefit, an additional basic insurance provision, which doubles the amount of insurance payable at no extra cost. Once the enrollee clocks age 36, the extra benefit decreases by 10% and continues decreasing 10% each year up until age 45, where the benefit ceases completely.
If a retiree elects the 75% reduction for Basic FEGLI and continues option A into retirement, they’ll keep some of the coverage free of charge once they’re retired and are up to age 65. While the basic coverage and $10,000 benefit for Option A will be reduced by 75%, you’ll maintain 25% at no cost.
The remainder of the basic coverage is usually sufficient to offset the cost of burial or funeral rites. Retirees also have the option to elect a 50% reduction or no reduction by paying additional premiums.
Reducing Your Coverage
If you’re currently employed and want to reduce your life insurance coverage, you need to complete a new SF 2817, Life Insurance Election Form and submit it to your H.R. office.
As a retiree, you can reduce your FEGLI life insurance and sign up for the coverage you wish to maintain at any possible time. You only need to mail a signed letter to the OPM Retirement Office at Office of Personnel Management, Retirement Operations Center, P.O. Box 45, Boyers, PA 16017-0045.
Any cancellation or reduction must be in writing with your original signature. Also, include your Social Security number or retirement claim number and specify what you want.
Note: you cannot increase your coverage or reinstate canceled coverage after retirement.
The bad news about this process is that it takes months for the changes requested to take effect, which is why many retirees are not anxious to make any changes. However, doing so will save you money, ensure your family is better protected, and ensure you’re informed to make better decisions.
Lastly, it’s essential to regularly update your FEGLI Designation of Beneficiary Form to ensure the benefits will go to the person who needs them. After some time, or if you can’t remember who your beneficiaries are, you can file for a new form.
