Many federal employees in the United States believe that Federal Employee Group Life Insurance (FEGLI) is the best plan for them because they’re immediately enrolled in the basic plan as soon as they start working. Many people choose to purchase one of the three extra coverage alternatives (Options A, B, or C). But how can federal employees know they’re receiving the most affordable plan with the best coverage? Have they thoroughly considered the plans’ advantages and drawbacks? Are they aware of other options?
We’ve compiled a list of FEGLI‘s advantages and drawbacks to help federal employees better understand its costs and benefits. We believe that this list will allow federal employees to determine if FEGLI is the appropriate plan for their families.
Advantages of FEGLI
• Convenience – You’re instantly enrolled in basic coverage regardless of your age or health. There are no medical tests required, and you’re guaranteed coverage as long as you are employed by the government and pay the payments. The premiums are also collected from your paycheck automatically, so you don’t have to think about making payments.
• Coverage amount selection – The base plan covers your salary rounded up to the closest thousand plus $2,000, but you can opt to add extra coverage. Option A increases your coverage by $10,000, and Option B allows you to pick even more.
• Family coverage – In addition to yourself, Option C lets you cover your spouse and children. Other plans required you to have separate insurance for each individual.
Disadvantages of FEGLI
• Price – The extra coverage Option A, B, and C are add-ons to the base plan, and their premiums rise as you become older. The rates for your spouse and children’s coverage are dependent on your age, not the age of your family members; thus, these expenses rise as you age. If you want to add Accidental Death and Dismemberment Insurance, you’ll have to pay an additional premium.
• Coverage could be temporary – You’ll be eligible only while working for the federal government or until you retire from that position. If you leave your employment or are fired, you lose your FELGI coverage.
• Limited alternatives – While FEGLI does provide several options, it doesn’t provide Whole Life Insurance, Single Premium Whole Life, or Universal Life Insurance. These policies include features and advantages not found in FEGLI’s plans.
• Hard to increase coverage – You can reduce your coverage amount at any time, but only increase it during open enrollment periods, by completing a physical exam, or by having a “Qualifying Life Event.” The last open enrollment period was over ten years ago, in September 2004; thus, waiting for these open seasons to extend your coverage is imprudent.
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
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