Every eligible federal employee is automatically enrolled into the Basic Federal Employee Group Life Insurance, unless you waived it when you were hired on or if you’ve canceled it since.
The government pays for a third of your FEGLI Basic for you while you're working, and it’s pretty cheap. It’s even free for postal employees.
To calculate your FEGLI, take your salary rounded up to the nearest thousand, then add $2,000 to it. This is your Basic Insurance Amount, or “BIA.” For example: an employee with a salary of $84,500 a year will have Basic FEGLI coverage of $87,000.
15¢ per thousand of your BIA goes towards your FEGLI; so that's why it reflects as being a little bit higher than 15¢ per $1,000 of your actual salary.
If you're 35 or younger, the coverage amount is doubled – for free, at no extra cost!
Once you do turn 36, this Extra Benefit starts to reduce by 10% each year, and then it will level out after 10 years and you’ll merely have Basic Coverage at age 45. That Extra Benefit and its reduction process actually built-in automatically.
WHAT HAPPENS TO MY FEGLI AT RETIREMENT?
You have three different options.
75% (FREE) REDUCTION PLAN
The 75% reduction option is the free default setting. If you don't choose any other plan for retirement, this is what will take place.
If you retire before 65, the cost of your life insurance coverage remains the same as while you're working. But once you turn 65 or when you retire, whichever comes later, then it's free. But, that's when your amount of coverage will start to drop.
Thankfully, the reduction won’t happen all at once.
Your amount of coverage will drop by 2% a month, over 50 months (four years and two months); at which point you will only have a quarter of your original coverage remaining.
After that, you get to keep that 25% of your coverage, for free, forever. If that’s all you need in life insurance, then you’re set!
50% REDUCTION PLAN
With the 50% reduction option, you basically keep half of your coverage.
If you retire before 65, the price of this option will jump up to $90.05.
Once you do turn 65 or when you retire, whichever's later, the price will drop a little bit to $61.77 per month.
0% REDUCTION PLAN
You do have the ability to opt for no reduction and keep your full coverage.
If you retire before 65, the cost of this option is $213.59 per month. It's a pretty dramatic increase.
Once you do turn 65 or when you retire, the price is a little cheaper. It drops down to $185.31. That may feel pricy, but you will get to maintain your full $87,000 in life insurance for the rest of your life at that same cost.
WHAT IF I CHANGE MY MIND ABOUT MY CHOSEN FEGLI REDUCTION?
Let’s say you selected the free 75% reduction plan, only to realize that the remaining quarter of your coverage won’t be enough life insurance for you. How can you supplement that while you’re working?
The best thing to do is to act now before you retire, because once you're retired, it will be harder – and will cost more – to get coverage.
You need to find a supplemental partner who knows how FEGLI works– and who can offer life insurance plans with coverage and rates that will be beneficial to you.
Don’t procrastinate when it comes to finding a better option. If you just take the initiative while you're young, you can increase your present coverage, keep enough life insurance for your retirement, and save thousands of dollars over time.
Do you know if your benefits or coverage through FEGLI will be enough?
United Benefits can help you figure that out!
Let’s say you’re age 45 and paying for $87,000 worth of coverage.
If you select a policy with United Benefits in the present for that same amount of life insurance, the price and coverage with United Benefits will be locked in and never change – not even after you retire or turn 65, which is when FEGLI costs would otherwise skyrocket for you.
While you're working, United Benefits can double your coverage and then when you retire, you’ll have paid 70% less and will still maintain $87,000 in coverage– that’s a savings of over $18,000! Plus, we will show you how to keep $21,750 in coverage for free!
United Benefits has assisted thousands of federal employees on several impactful topics. We can help you, too. Ask us anything!
Click here to request a consultation and talk one-on-one with a representative about the options available to you.
