Quick Tip: Complete the Instant Quotes form to receive a price on a life insurance policy to supplement your Basic FEGLI Plan.
We provide low cost term life insurance for Federal Employees to supplement the Federal Employee Group Life Insurance Plan. We offer exceptional rates when the FEGLI Plan Option B begins costing more per pay period on the employee SF-50. When a Federal Employee reaches the age of 46 I think it’s very compelling to supplement the FEGLI Basic plan with a low cost term life insurance policy. Federal Employees carrying the FEGLI plan with Option B will notice large price increases on their SF-50 at ages 45, 50, 55 and 60. At this point in your life you can opt to keep the Basic FEGLI coverage and buy an affordable low cost term life insurance policy to replace the option B part of the plan which was providing a death benefit 5 times your annual salary.
Checkout the special spreadsheet that assists you calculate the total FEGLI cost over your career along with the article Low Cost Term Life Alternative to FEGLI Option B.
Life Insurance for Federal Employees – Supplement FEGLI
You can choose a competitive policy with a face amount at a level premium (a locked in payment) for a 10, 15, 20 or 30 year period at a much more affordable price. Then you can take the Basic FEGLI coverage into retirement and utilize the 75% reduction option that will give you a small death benefit of around $25,000 beyond the years after the term policies expire. After the age of 65 you will no longer have to make a payment for the Basic FEGLI death benefit.
Carry the Basic FEGLI coverage into Retirement
To keep your Basic FEGLI coverage in retirement, you must have been insured with your basic coverage for at least five consecutive years while working. You will be given three choices on how you wish to carry your basic coverage into retirement:
The 75% reduction option. If you choose this option, a reduction begins the second month after your 65th birthday, or the second month after you retire, whichever is later. At that time your original coverage amount will begin to decrease by 2% each month until it reaches 25% of the original amount. It will remain level at that value for the rest of your life. Prior to the coverage starting to reduce, it will cost you 32.5 cents per thousand. After the death benefit begins reducing, your basic coverage is free and you will never pay another premium for it.
Here is an example: You retire at age 60, your basic coverage is a $100,000 death benefit and you choose the 75% reduction option. After you turn 65, the death benefit begins reducing by 2% a month until it reaches $25,000. It will remain at that $25,000 value for the rest of your life. Prior to age 65 this benefit cost you $32.00 per month. After the age of 65 when it began reducing you no longer have to make payments. Once the death benefit reaches the full reduction you have a permanent death benefit to take care of your final expenses. This is a compelling reason to keep the basic FEGLI coverage into retirement and is a unique value you as a Federal Employee will probably not find elsewhere.
The second choice is known as the 50% reduction option. This option allows you to keep half of your Basic coverage. The reduction on this coverage also begins the second month after your 65th birthday, or the second month after you retire, whichever is later. However, it only goes down by 1% a month until it arrives at 50% of the original coverage amount. Prior to it reducing, it will cost you 96.5 cents per thousand. After the reduction begins, the cost will go down to 64 cents per thousand until you die, cancel it, or decide to reduce it to the 75% deduction option.
The final choice is the No Reduction option. If you feel you would like to keep your entire Basic Coverage amount, this is the option you would choose. This option would cost you $2.265 every month per thousand prior to the age of 65 and $1.94 each thousand after. So applying these figures to our previous scenario, your $100,000 would cost you $226.50 each month before age 65 and $194.00 every month after. Your $100,000 death benefit never decreases and you make a payment all your life.
Specific health issues will affect the price when buying a term life insurance policy. I represent over 60 life insurance companies that all have a little different risk tolerance for different health conditions. It’s best to obtain a quote here and then we can work on getting the best price with the most affordable carrier. As a matter of fact, if you buy a low cost term life insurance policy, you can save thousands of dollars over the course of your life with a locked in payment and lower than what you’re seeing on your SF-50 for FEGLI Option B.
Life Insurance for Federal Employees
In conclusion, if you want to provide life insurance for your family in the same amount provided by FEGLI Option B, when you turn age 46, the most cost effective way to achieve this is to buy a low cost term life insurance policy to provide that function in lieu of using option B.
I do recommend keeping the basic FEGLI life insurance coverage and carrying that into retirement for the permanent modest death benefit it provides with no premium payments to pay after turning age 65. The Basic FEGLI plan also provides a living benefit in the event you are diagnosed with a terminal illness and your life expectancy is nine months or less, you can use a living benefit. The only question you have to ask yourself is, will $25,000 provide enough coverage for your final expenses after the term policies expire. If not, you can look at laddering term policies starting with a 30 year term or get a quote on a low face amount whole life policy.
Check out our article FEGLI Option B Vs Private Life Insurance.