FEGLI is the Federal Employees Group Life Insurance Program. It’s the biggest group life insurance program in the WORLD. Federal government employees are all eligible for this guaranteed issued life insurance coverage.
But, just because it’s the largest, 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.
If you’re covered by FEGLI and plan on carrying it into retirement, I would suggest taking another look – especially if you’re 50 or older. 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:
- 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 you’re needs are more than that, you’re left underinsured.
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 and taking the maximum $450,000 of coverage (annual salary + 5x annual salary). The rates I’m showing are actual rates based off the FEGLI calculator.
FEGLI Individual Policy
|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 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. Heck, 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.
The time to start planning for this is NOW. Life insurance gets more expensive every year that goes by and good health is never guaranteed.
Bottom Line: If you’re age 50 or older and plan to carry some life insurance in retirement, speak with an independent life insurance agent who is familiar with FEGLI. We’ll find the lowest rates you can qualify for, compare your options side by side with FEGLI premiums and show you exactly what you can be saving.
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. Not having one could be a drastic mistake for you and your family.
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 to reason to have life insurance, your inheritance. You want to leave you 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 your quote around. 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.
Working with an Independent Agent
Working with an independent agent has several advantages. The first is that they understand the life insurance marketplace. Unless you are an insurance expert, you might not understand all of the rules, regulations, and advantages to different types of policies, that’s why it’s vital that you work with an independent agent. Not only do they understand all of the policies, but they also have experience working with different applicants and can find a company that will look more favorably towards your specific conditions.
Another advantage of independent agents is their ability to work with many carriers, which gives me plenty of options to offer you as you look for the right policy and company.
Additionally, independent agents can save you time that you would spend calling and researching other companies. If you decide that FEGLI isn’t for you as you enter in retirement, you’ll need to find a company that offers the best plan for you. There are hundreds of life insurance companies that sell various plans, you could spend hours trying to find the best policy, or you can have someone else do all the work for you, us!
Simply fill out the quote form and you can have the lowest rates from the highest-rated companies sent straight to you. No calling. No questions. Just low rates for the perfect policy. Simple as that.
If you have any questions about FEGLI plans or life insurance plans in general, give us a call. Our goal is to find the best policy for your budget and needs.