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FEGLI – Life Insurance For Federal Government and Postal Workers

Most large companies provide their employees with group life insurance benefits and the Federal government is no different. Traditionally, Federal government employees are eligible to participate in the Federal Employee Group Life Insurance program, also know as FEGLI. This program offers three different forms of benefits: Option A (Standard), Option B (Additional) and Option C (Family). This article will focus on Option B; also know as the supplemental option.When enrolling in Option B of the FEGLI program, employees are able to elect up to five times their annual income, in life insurance. This can be done in the first 31 days of employment and then again during open enrollment periods, which only seem to occur every few years. If an employee enrolls within the first 31 days of employment, he/she can do so without providing any form of medical information. To the average person this may not mean much, but avoiding medical underwriting can be a very important benefit to someone who would otherwise not qualify for coverage. Regardless of whether you are in excellent health or not-so-good health, you can qualify for Life insurance coverage and pay the same premium as every other participant. Again this is great news for someone who otherwise may not qualify for coverage, but what does this mean for someone who is in average or better than average health?In order for an insurance company to offer coverage without reviewing medical information, their prices must be adjusted. The pricing for the FEGLI program is designed to increase in five-year age group increments. For example: between ages 35-39, every $1,000 of insurance will cost $0.04 bi-weekly; between ages 45-49, every $1,000 of insurance will cost $0.09 bi-weekly; and between ages 55-59, every $1,000 of insurance will cost $0.28 bi-weekly.  A Federal employee who earns a $100,000 salary and elects the full $500,000 of Option B FEGLI coverage, he/she will go from paying $40/month at age 35 to paying $280/month at age 55 – a fairly steep increase for a relatively short period of time. Again, for someone who would otherwise not be eligible for Life insurance, this is a great deal. However, for someone who can qualify for individual coverage, the price increases are too much to justify staying with the FEGLI program.It is a shame that most Federal employees do not recognize the inflated prices they pay until around age 50-55. This is where premiums will start to increase exponentially and become a bit more cost prohibitive for many people. The good thing is that even at age 50 or 55, Federal employees who are in standard or better health are able to obtain coverage at lower rates. A 55-year old Federal employee in average health, with $500,000 of FEGLI coverage would pay $280/month and at age 60 would increase to $600/month. The same 55-year old Federal employee in average health can obtain an individual $500,000 Term-life policy for under $200/month without facing an increase at age 60. If he/she is in really good health, coverage could cost as low as $80/month. A savings of $80-$200/month or $960-$2,400/year is certainly something worth evaluating, especially for the long run.So why wait until age 55 to start saving on your life insurance premiums? The earlier a Federal employee identifies the inflated prices they are paying with the FEGLI program, the sooner they can replace it with an individual life insurance policy and begin saving. A 35-year old in good health can lock into a $500,000, 30-year Term-life policy for approximately $50/month. By the time that 35-year old reaches age 65, he/she will have saved a cumulative amount of approximately $63,000 by maintaining the individual policy instead of the FEGLI coverage.  FEGLI is a great program – it’s easy, convenient, and the insurance is through Metropolitan Life, which is a solid insurance company. Financially however, it often just does not make sense. Someone who is in average or better than average health will spend tens of thousands of dollars in excess, by using the FEGLI program for their Life insurance. Don’t let this happen to you. Review your options, look into an individual policy and most importantly look toward the future. Perhaps you will not save money this year, but year three alone may save you enough to make up for the first two years. Talk to an insurance broker today and find out how much an individual Term life insurance policy could be saving you.