Federal
Employee’s
Group Life Insurance: Advantages & Disadvantages
The Federal Employee’s Group Life Insurance program
(FEGLI) is the world’s largest group life insurance
plan covering over 4 million government employees and their
families. The FEGLI program is
solid, but in some cases, it may not be the top solution
to your life insurance needs. The information below is a general review
of the strengths and weaknesses of the FEGLI term life insurance
plan.
Advantages
of the FEGLI Insurance Plan:
- If you accept the basic insurance option (which is
automatic unless you waive coverage), you can elect optional
insurance without having to do any medical exams. Therefore,
you cannot be denied coverage if you accept it up front.
- The federal government covers 1/3 of the cost of
basic insurance which is one time your base pay rounded
to the next $1,000 plus $2,000. Additionally,
the cost for basic insurance is fixed* as long as you
are an eligible employee.
- Employees under age
45 automatically get extra coverage above the basic insurance
amount at no additional charge. For more information
on this extra benefit see, basic
insurance age multiplication factor.
This benefit is based on your age at the time of your
death.
- Accidental Death and Dismemberment
(AD & D) coverage
is available at no additional cost for all employees
that participate in Basic Insurance as
well as the Standard Insurance option.
Group AD & D benefits are paid in addition to other
FEGLI benefits. For more details on AD & D coverage
see accidental
death and dismemberment benefits.
- A living benefits rider is included
with Basic Insurance which allows you
to receive a partial or full lump sum payment if you
become terminally ill and are not expected to live more
than nine months.
- In the event coverage under the FEGLI program stops
or at retirement, you have
an option to convert your policy.
This conversion privilege allows you
to exchange coverage under the FEGLI plan for a "portable” individual
life policy without proof of health or medical conditions.
- Under the Option C Family Coverage, FEGLI offers optional
spousal and dependent children’s insurance.
Disadvantages
of the FEGLI Insurance Plan:
- Under the FEGLI plan’s optional insurance
(A, B and C), insurance costs increase every five years.
- Monthly costs of Optional Insurance are
excessive at ages 45, 50, 55 and beyond.
- FEGLI Optional Coverage is
expensive and cannot compete with individual
level term life insurance. Low cost individual
term insurance is much lower priced. Additionally, with
level term insurance, you can guarantee or “lock-in” your
rate for a longer period of time (I.E. 10, 15, 20 or
even 30 years). For an actual price comparison see, comparing
the FEGLI term life with low cost ordinary term life insurance.
- Coverage amounts are limited. The maximum amount of
life insurance available (basic plus maximum option
additional insurance) is approximately six times your
current income. In most cases, your life insurance needs
exceed these maximum limits. These numbers do not include
accidental death and dismemberment insurance.
- At retirement,
options are limited, coverage is likely to reduce and costs
may continue to increase. For more details, see what happens to FEGLI when I retire?
For an actual price comparison
see, Cost Comparison: FEGLI
versus low cost level term life insurance.
 Related
Links
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* Coverage costs are fixed unless FEGLI rates increase.
If rates increase, all employees will be affected. |
