FEGLI is the Federal Employees Group Life Insurance Program. It’s the biggest group life insurance program in the world.
This article will review the FEGLI policies, rates, and provide comparisons:
- About FEGLI
- Is FEGLI Worth It?
- FEGLI Life Insurance Company Ratings
- FEGLI Rates are Expensive
- Life Insurance Coverage in Retirement
- Compare FEGLI Life Insurance vs. Private Companies
FEGLI is a program for federal government employees. Federal government employees are all eligible for this guaranteed issued life insurance coverage.
Just because it’s the largest program, doesn’t mean it’s the best for everyone. If you are eligible for a FEGLI, there are some cases that it isn’t the best option.
FEGLI Policy Options
FEGLI offers two different individual policies.
Option A offers $10,000 in coverage. It’s essentially, a small burial insurance policy. For most people, we recommend keeping this policy.
Option B is the policy we will discuss below. It allows for more coverage but is still capped. We recommend shopping for life insurance with other carriers to compare rates.
The numbers become cost-prohibitive in retirement and you should consider purchasing an individual life insurance policy if you can qualify for one. Let us explain a few things about FEGLI Option B policy:
- FEGLI premiums increase every 5 years after you turn 50. Individual life insurance premiums remain level.
- FEGLI premiums increase AGAIN when you retire. This increase is on top of the premium increases every 5 years. Individual life insurance will remain level when you retire.
- FEGLI premiums are based on the risk of the group as a whole. With it being guaranteed issued, the healthy are penalized because they are grouped with the unhealthy. With that said, if you’re healthy and over the age of 50, you’re paying more than you have to and it will only get worse every 5 years.
- FEGLI coverage is capped. The most you can get is 5 x’s your salary. If your needs are more than that, you’re left underinsured.
Is FEGLI Worth It?
After working with dozens of life insurance companies, and comparing rates for thousands of people over the years, we have found that FEGLI life insurance is usually not worth the money.
For most government employees, we recommend keeping option A of the policy. However, if you need more coverage, comparing the best life insurance companies will get you a better policy than using FEGLI’s option B policy.
FEGLI Life Insurance Company Ratings
Here are the ratings for the Federal Employees Group Life Insurance Program:
- A.M. Best: N/A
- Affordability Index: 6.5
- Ease of Applying: 9.1
- Customer Service: 8.5
- COMDEX Ranking: N/A
A.M. Best is the industry benchmark for financial strength in the life insurance industry. The other three metrics are based on a number of factors including our industry knowledge of FEGLI compared with other companies. The COMDEX ranking is a composite score that considers A.M. Best and other top ratings agencies.
FEGLI Rates are Expensive
Here is an example of FEGLI premiums compared to a 30-year term individual policy. We’ll assume a 50-year-old male with an annual salary of $75,000 is taking the maximum $450,000 of coverage (annual salary + 5x annual salary). The rates below are actual rates based on the FEGLI calculator.
|Age 50-54||$1,365 annual||$1,748 annual|
|Age 55-59||$2,730 annual||$1,748 annual|
|Age 60-64||$5,850 annual||$1,748 annual|
|Age 65-69||$7,020 annual||$1,748 annual|
|Age 70-74||$11,700 annual||$1,748 annual|
|Age 75-79||$17,550 annual||$1,748 annual|
The reason for this illustration is to show you that the premiums for life insurance from FEGLI are cost-prohibitive during retirement. They aren’t even competitive pre-retirement.
In fact, in 1986, the Government Accountability Office reported that FEGLI was inferior to private plans. Even the government knows FEGLI isn’t competitive, but they deemed that there is nothing they can do about it.
If you’re age 50 or older and plan to carry some life insurance in retirement, compare policies from the top-rated companies, and you’ll get a better rate.
Life Insurance Coverage in Retirement
There are a lot of people that think life insurance in retirement is a waste of money, but that isn’t necessarily true. There are a lot of cases where retirees should still hold a life insurance policy.
Even in retirement, there is a chance that you have thousands of dollars in debt. If you were to pass away, all of your debt would be passed onto your family members and loved ones. That’s not exactly the legacy that most people want to leave.
This is where life insurance can be a useful tool. Now your family has the resources they need to pay off all of those debts. Every year there are countless families that are left with thousands of dollars in debt that they didn’t expect to have to pay for. This can create a serious strain on a grieving family.
Aside from not leaving your family with a mountain of debt, there is another important reason to have life insurance: your inheritance. You want to leave your loved ones with all of the money you’ve saved through your hard work. Unfortunately, Uncle Sam wants his portion too. All of the money that you leave behind for your family to use can quickly be depleted by taxes and fees. Having an adequate life insurance policy will prevent your family from being left with nothing.
Getting the Lowest Rates
As you get closer to retirement, your life insurance premiums are going to be higher, but that doesn’t mean that the policy has to break your bank. Let’s talk about the things you can do to make sure your premium doesn’t go any higher.
The first is to improve your health. Unless you purchase a no-exam life insurance policy, your health is going to have a significant impact on your monthly fees. Improving your blood pressure, cholesterol, and weight can go a long way in saving you money on your life insurance.
The next is to quit any bad habits like smoking or excessive drinking. Being a smoker is going to cause your monthly premiums to double or triple every month, which can cost you thousands of extra dollars for your coverage. Before you apply for a policy, kick those bad habits for good.
Finally, shop around with multiple carriers. Every company is different and they all have different systems for rating their premiums. You could get drastically different premiums just by looking at different companies. The best and easiest way to do your comparative shopping is by using an independent agent.
Compare FEGLI Life Insurance vs. Private Companies
Before making a decision on a FEGLI life insurance policy, shop around and compare rates and coverage amounts with other top-rated companies. You’ll typically find a better policy.
Here are some other niche life insurance companies for you to consider.