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Check out the special spreadsheet that assists you in calculating the total FEGLI cost over your career along with the article Low-Cost Term Life Alternative to FEGLI Option B.
Federal Employee Life Insurance
As an eligible employee, you are automatically enrolled in Basic insurance unless you waive this coverage. Basic insurance covers your life for whichever is greater:
1) Your annual rate of basic pay rounded up to the next even $1,000, plus $2,000; or
This is called the Basic Insurance Amount, or BIA. The Government pays one-third of the premium cost for Basic and you pay two-thirds. The U.S. Postal Service pays the entire cost of Basic insurance for its employees.
If you are under age 45, you automatically have extra Federal Employee Life Insurance coverage without paying any additional premium. This Extra Benefit increases the amount of Basic insurance payable at the time of your death if you die before age 45.
FEGLI is a great program. All is great until you start reaching the age of 45. Then the coverage starts to get prohibitively expensive especially if you’re using FEGLI option B with additional optional coverage as we’ve covered in a number of articles here on LifePolicyShopper.com. Here…
If you have Basic insurance, you may also elect Federal Employee Life Insurance Optional insurance. You are not automatically covered by Optional insurance like you are with Basic insurance. You must take action to elect Optional insurance. You pay the full cost for all Optional insurance you elect. You must have Basic insurance to elect any Optional insurance. Optional insurance provides coverage in addition to what you have with Basic insurance.
There are three types of Optional insurance: Option A-Standard, Option B-Additional, and Option C-Family.
Option A insures your life for $10,000.
Option B insures your life for 1, 2, 3, 4, or 5 multiples of your annual rate of basic pay rounded up to the next even $1,000.
Option C insures the lives of your spouse and eligible dependent children. It comes in 1, 2, 3, 4, or 5 multiples of coverage. Each multiple is equal to $5,000 for a spouse and $2,500 for each eligible dependent child.
Accidental Death & Dismemberment Benefits
Accidental death and dismemberment (AD&D) coverage is an automatic part of Basic insurance and Option A insurance (if elected) for employees, at no additional cost. There is no accidental death and dismemberment coverage with Options B and C, and there is none for annuitants or enrollees in workers’ compensation.
Accidental death benefits are payable when you sustain injuries by accidental means and, within one year afterward, you die resulting directly from those injuries. Under Basic insurance, accidental death benefits are equal to your BIA (without the Extra Benefit). Under Option A, accidental death benefits are equal to your Option A coverage.
Accidental dismemberment benefits are payable when you sustain injuries by accidental means and, within one year afterward, you lose a limb or sight in one or both eyes resulting directly from those injuries. Under Basic insurance, accidental dismemberment benefits are equal to one-half of your BIA for the loss of one limb or sight in one eye. Under Option A, accidental dismemberment benefits are equal to one-half of your Option A coverage for the loss of one limb or sight in one eye.
Initial Election of Federal Employee Life Insurance
Unless your position is excluded from FEGLI coverage by law or regulation, you are automatically enrolled in Basic insurance. If you do not want this coverage, you can either waive it when you first become eligible for coverage or cancel it at a later date. Optional insurance is not automatic; you must specifically elect the types of Optional insurance you want within 60 days of becoming eligible.
Basic insurance coverage is effective on the first day you are in a pay and duty status in an eligible position. Option A and Option B insurance coverage is effective on the first day you are in a pay and duty status on or after the day your employing office receives your election. If the employee is not in a pay and duty status on the date the employing office receives the election, the coverage becomes effective the next date that the employee is in pay and duty status. Option C insurance coverage is effective on the day your employing office receives your election without regard to pay and duty status.
Waiver/Cancellation of Insurance
When you first become eligible for FEGLI coverage, you must specifically waive Basic insurance if you do not want it. If you do not want any Optional insurance, you do not have to do anything. Any Optional insurance you do not elect is automatically waived.
You may cancel your Basic and/or Optional insurance coverage at any time unless you have assigned your insurance. When you cancel Basic insurance, you automatically cancel all Optional insurance. Canceling Optional insurance has no effect on Basic insurance.
The cancellation is effective on the last day of the pay period in which you file it with your employing office. As an employee, your employing office maintains your FEGLI records. OPM does not have records for employees. OPM’s Retirement Services maintains records for annuitants and for compensationers who receive worker’s compensation for more than one year.
Cancellation of Waiver by Providing Medical Information
You may cancel your waiver and obtain Basic insurance and/or Options A and B if at least one year has passed since the effective date of the waiver and you provide satisfactory medical information at your own expense. You must have Basic insurance to elect Optional insurance.
If you want to cancel a waiver, you must be an eligible employee and you must complete a Request for Insurance (SF 2822). Your agency will complete part of the form first. Then you complete your section. Your physician or other medical professional will examine you and complete the rest of the form.
Eligibility for Life Insurance as an Annuitant or Compensationer
When you retire, you are eligible to continue FEGLI if you meet all of the following requirements:
• You are entitled to retire on an immediate annuity under a retirement system for civilian employees;
• You have been insured for the 5 years of service immediately before the starting date of your annuity, or for the full period(s) of service during which you were eligible to be insured if less than 5 years;
• You are enrolled in FEGLI on the date of retirement; and
• You have not converted to an individual policy.
The requirements for continuing life insurance as a compensationer are similar. Compensationers must meet the 5-year/all-opportunity requirement as of the date they started receiving compensation.
Post-65 Reductions in the Amount of Insurance
If you are eligible to continue your Basic insurance as an annuitant or compensationer, you must choose the amount of Basic insurance you want to continue after age 65 (or retirement, if you are already age 65 or older when you retire). The choices are 75 Percent Reduction, 50 Percent Reduction, and No Reduction. NOTE: Your coverage does NOT reduce when you reach age 65 if you are still an employee at that time.
If you choose 75 Percent Reduction, your Basic insurance reduces by 2 percent of the pre-retirement amount each month beginning at age 65 until 25 percent of the pre-retirement amount remains. If you choose 50 Percent Reduction, your Basic insurance reduces by 1 percent of the pre-retirement amount each month beginning at age 65 until 50 percent of the pre-retirement amount remains. If you choose No Reduction, your Basic insurance will not reduce and 100 percent of the pre-retirement amount is payable as a death benefit.
If you choose 75 Percent Reduction, the coverage will be free after you are retired and reach age 65.
If you choose 50 Percent Reduction or No Reduction, you will pay an extra premium for this coverage after you are retired and reach age 65.
When you are retired and reach age 65, Option A coverage automatically begins reducing by 2 percent of the pre-retirement amount each month until 25 percent of the pre-retirement amount remains. Option A is free once it starts to reduce. There is no reduction election to make at the time of retirement for Option A.
At the time you retire or become insured as a compensationer (for compensationers, typically after 12 months in nonpay status), you must choose how many of your Option B and/or C multiples you want to continue. You must also choose whether to have some or all of those multiples reduce (“Full Reduction”) or not reduce (“No Reduction”) after age 65 (or retirement, if later). You may choose Full Reduction for some multiples and No Reduction for other multiples of your Option B and/or C coverage. In addition, shortly before reaching age 65, you will receive a notice providing you a second opportunity to make this election. You can elect to keep your original reduction election(s) made at retirement or change them by returning the notice to OPM at that time.
If you choose Full Reduction, after you are retired and upon reaching age 65, each multiple starts reducing by 2 Percent of the pre-retirement amount each month until the amount has been reduced by 100 Percent and the final value = $0. Until the reduction starts, you pay the same premiums as active employees, appropriate to your age. When the reduction starts at age 65, withholdings stop and Options B and/or C become free.
If you choose No Reduction, your Options B and/or C coverage will not reduce at all. After age 65, you will continue to pay the same premiums as active employees, appropriate to your age.
Living Benefits in Federal Employee Life Insurance
Living benefits are life insurance benefits paid to you while you are still living, rather than paid to a beneficiary or survivor when you die. You can elect a living benefit if you are diagnosed as terminally ill with a life expectancy of nine months or less, and you have not assigned your insurance. If you are physically or mentally incapable of electing living benefits, an individual having power of attorney can apply for living benefits on your behalf.
Only Basic insurance is available for a living benefit. Optional insurance cannot be paid as a living benefit. If you are an employee, you can select either a full living benefit (all of your Basic insurance) or a partial living benefit (expressed as a multiple of $1,000). Annuitants and compensationers can elect only a full living benefit.
If you’re age 45 or older check out the rates in our live quote engine of a low-cost term life insurance policy and drop your FEGLI coverage back to basic. This will save you thousands of dollars over your career and retirement. Check out our article Life Insurance For the Federal Employee.