Most Federal employees should choose private insurance over Federal Employee Group Life Insurance (FEGLI). Private insurance offers a much larger death benefit amount at a lower cost (if you are healthy).
FEGLI is a great option if you are unhealthy or unable to obtain private insurance for medical reasons. FEGLI does not require a health exam when you join service. This is a huge advantage if you are excluded from the private sector for medical reasons. FEGLI does offer an open season where you can increase life insurance coverage without a health exam. Open seasons are very rare. The last open season happened in 2004 and 2016.
So, should you drop FEGLI in favor of private insurance? Below are scenarios that show the cost differences if you were age 45. The numbers for private insurance will change based on age. If younger than 45, you can expect the premium to be less. If older than 45, you can expect the premium to be higher.
One of the drawbacks with FEGLI is that the Option B coverage increases as you age. Once you retire, FEGLI premiums increase to the point of being cost-prohibitive. Private life insurance premiums will stay flat for the life of the contract.
Below are examples of standard and preferred ratings. Standard rating is the premium an average person generally receives after a health exam. Preferred rating is the lowest premium amount an applicant can receive. Around 20% of applicants receive a preferred rating. These figures display a male’s premium rating. Females will generally have a lower premium.
For less cost, you can obtain $400,000 MORE coverage on a 20-year standard term policy.
What would be the cost savings over the life of a Federal employee’s career?
Below is the total amount of premiums that would have been paid from FEGLI vs a 20-year and 30-year term private policy over an equivalent time period. The difference in paid premiums is shocking.
On average, the savings for a 20-year term policy would be around $32,700 and for a 30-year term policy around $108,700. In addition, you receive $400,000 MORE death benefit coverage as well.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we focus on retirement planning for federal employees. Learn more about our process designed for the career federal employee.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
