FEGLI Federal Employee Group Life Insurance vs Private Life Insurance

Researcher & Writer

April 10, 2020

In the following article, we will cover the pros of FEGLI - Federal Employee Group Life Insurance and contrast it with private life insurance. Is FEGLI the best choice for you or is there a better plan available through one of the private, top rated best life insurance companies in the marketplace?

What is FEGLI?

As the name suggests, FEGLI is a group life insurance policy that the federal government offers to its employees. Employees of the US Federal Government are entitled to participate in certain benefits, programs and investment opportunities not available to the rest of the public. One of those unique opportunities is the Federal Employees Group Life Insurance Program (FEGLI), which is essentially life insurance for those in the federal government. If you work for the United States Federal Government, then it’s time to explore whether FEGLI life insurance is right for you.

Is FEGLI life insurance better than traditional private life insurance?

Because the government is subsidizing your life insurance, it usually makes the most sense for a federal employee to take advantage of the system and opt-in to federal life insurance through FEGLI. However, every individual has a unique situation and unique needs. It is also not guaranteed that FEGLI will be the cheapest life insurance policy or the best coverage option.

You can check out sample private life insurance rates by age or by term length:

Please note: FEGLI rates on Option B and Option C increase every 5 years. Therefore, what you are paying today will not be your FEGLI rate down the road. In contrast, term life insurance rates are fixed for the term.

Age 50 is when government employees will start noticing a big difference in FEGLI life insurance rates. See the below example on the cost of life insurance for FEGLI vs private life insurance.

You can view a FEGLI calculator to determine what your continuation of federal life insurance after retirement at the US Office of Personnel Management.

FEGLI Rates

Bi-Weekly and Monthly withholding is per $1,000 of FEGLI option B life insurance.

Age Group	Biweekly withholding ($)	Monthly witholding ($)
–	per $1,000 of insurance	per $1,000 of insurance
Under age 35	0.03	0.065
Age 35 through 39	0.04	0.087
Age 40 through 44	0.06	0.13
Age 45 through 49	0.09	0.195
Age 50 through 54	0.14	0.303
Age 55 through 59	0.28	0.607
Age 60 through 64	0.6	1.3
Age 65 through 69	0.72	1.56
Age 70 through 74	1.2	2.6
Age 75 through 79	1.8	3.9
Age 80 and Over	2.4	5.2

Rates as of January 1, 2016

FEGLI Rates vs Private Life Insurance Rates

At age 50, FEGLI life insurance rates would run $150.50 a month, increasing at age 55 to $303.50 a month. In contrast, private fixed life insurance rates for a 50 year old individual qualifying at a preferred plus health class would be as follows:

10 year level term $41.76 a month
15 year level term $60.28
20 year level term $79.20
25 year level term $117.99
30 year level term $134.35

All private life insurance rates as of 4/28/2016. Rates are subject to change and must be qualified for.

Does the US government pay for FEGLI?

FEGLI Basic is only partially paid for by the government. Through FEGLI, those who opt in to federal employee life insurance pay for 2/3 of the cost while the federal government pays 1/3.

Am I automatically enrolled in FEGLI if I am a federal employee?

If you are a new employee, then you are most likely enrolled in Basic. You were probably automatically signed up for basic life insurance coverage when you were hired. Some employees who have been working for the US federal government for some time may not yet be enrolled. It is possible to waive FEGLI if you do not want to participate.

What policies does FEGLI offer?

It is important to understand the difference between term life and whole life insurance. FEGLI offers group life insurance. It is not whole life insurance and does not build cash value.

Under FEGLI, there are four term life insurance policy options:

BASIC:

This federal government life insurance policy offers coverage equal to the amount of your annual salary rounded up to the next thousand, plus $2,000. For example, if your salary is $57,500, it would round up to $58,000 + $2,000 or $60,000 total coverage under FEGLI Basic. Postal workers receive the Basic amount of coverage for free.

This policy costs $0.15/ per thousand dollars of coverage paid every 2 weeks.

Example: If you earn $70,000/year, then you will have to pay $10.50 every two weeks, or $273/year.

Note: This cost does not increase with age, but assuming you get a raise every now and again, the amount you owe every week will go up according to your salary increase.

Basic coverage also includes accidental death insurance at no additional cost.

Option A:

This is a policy for only $10,000 of coverage, mostly used for people who only want to cover the cost of their funeral, burial, or final expenses.

This policy starts at $0.20 paid every two weeks, but can cost quite a bit more than this as well.

Note: The price of this policy is directly linked to your age.

Option B:

This is a flexible policy that allows you to determine the amount of coverage you want, ranging from 1-5 times the amount of your annual salary.

The cost of this policy depends on your age. See FEGLI rates above. If you are young and choose coverage equal to one year’s salary, then you may pay as little as $0.03 per every thousand dollars of coverage, every two weeks.

Note: In some instances Option B coverage may be cheaper than Basic coverage.

Option C:

This is a flexible coverage plan, also ranging from 1-5 times your annual salary. Under Option C, you can get coverage for your spouse and children as well. Eligible children must be under 22 and not married.

The cost of this coverage depends on the amount of coverage you want, and your age. See FEGLI rates below. The lowest possible cost would be $0.27 every two weeks. The cost of this policy also increases with age as well as increases in income.

Should I purchase private life insurance or choose an option through FEGLI?

FEGLI life insurance is great for anyone who may be considered high risk life insurance due to a pre-existing condition. However, for everyone who is healthy, keeping FEGLI past age 50 may not make good financial sense. The good news is you can have both FEGLI and Private life insurance, if that option is best for you.

Next Steps

No matter where you purchase life insurance, it’s important to do what is right for you. What may be right for everyone around you may ultimately be only an okay decision for you. And when you’re making a decision about life insurance, then “ok” really doesn’t cut it.

Life insurance is one of those things you really want to be sure about before you take the plunge. So, how can you be sure? Before you sign on for any of the different types of life insurance policies offered through FEGLI, it’s advised that you do two things:

Speak to your HR department at length. As relevant questions. Learn what kind of coverage you can get and at what cost.
See what’s available to you in the private sector. Find out what’s available in the market, and how much coverage you can get and at what cost.

It may seem a whole lot easier to just get your life insurance needs taken care of through your HR department at work, but TermLife2Go makes exploring private life insurance options easy. We do this quickly and accurately.

Our process is as follows:

Learn about your needs/wants, life situation, health, etc.
Compare that information to what dozens of the best private life insurance companies have to offer—find out what they will offer you
Give you customized recommendations based on the above information

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TermLife2Go

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