Federal employees: Are you overpaying for life insurance? The Federal Employees’ Group Life Insurance (FEGLI) program provides easy-to-enroll coverage, but its rising costs over time make private life insurance a more attractive option for many.
This guide breaks down FEGLI’s cost structure, post-retirement changes, and private insurance alternatives to help you make the best financial decision.
FEGLI Coverage and Cost Breakdown
FEGLI consists of Basic coverage and three optional add-ons: Option A, Option B, and Option C.
FEGLI Basic Coverage
✅ What It Covers: Your annual salary, rounded to the next $1,000, plus $2,000.
✅ Who Pays? The government covers one-third of the premium, while employees pay two-thirds through payroll deductions.
✅ How Much Does It Cost?
- Biweekly Premium: $0.325 per $1,000 of coverage, but after the subsidy, the employee pays $0.216 per $1,000.
💡 Example: If you earn $100,000, your Basic FEGLI coverage is $102,000, and you’d pay:
- $102 × $0.216 = $22.03 biweekly
- $572.78 annually
📢 Employees: The government covers 100% of Basic premiums for active employees only—retirees pay full costs unless they opt for reductions.
FEGLI Option A (Additional $10,000 Coverage)
✅ What It Covers: A flat $10,000 in extra life insurance.
✅ Cost: Premiums increase with age, from $0.20 biweekly (under 35) to $6.00 biweekly (over 60).
📌 Who Should Consider It? Option A is inexpensive for younger employees but provides limited coverage—often not enough for family financial security.
FEGLI Option B (Salary Multiples Coverage) – The Expensive One
✅ What It Covers: Up to five times your salary in additional life insurance.
✅ How Much Does It Cost? The cost increases every five years.
💡 Cost Breakdown for a Federal Employee Earning $100,000 with 5x Option B Coverage:
| Age | Status | Cost per $1,000 | Annual Cost for 5x ($500,000 coverage) |
|---|---|---|---|
| 45 | Active | $0.08 biweekly | $1,040 |
| 60 | Active | $0.52 biweekly | $6,760 |
| 65+ | Retired | $1.27 monthly | $15,240 |
| 80+ | Retired | $6.24 monthly | $37,440 |
📢 Key Takeaway: If you’re over 50, FEGLI Option B gets significantly more expensive. By age 80, a $500,000 policy costs over $37,000 per year.
FEGLI Option C (Family Coverage)
✅ What It Covers: Insurance for spouses and dependent children.
✅ Coverage Levels: Up to $25,000 for a spouse and $12,500 per child.
✅ Cost: Premiums are lower than private policies but increase with age.
📌 Who Should Consider It? Option C provides a simple and affordable supplement if your spouse lacks adequate life insurance.
FEGLI Costs After Retirement – What Changes?
Many federal employees assume they can keep FEGLI at the same price in retirement—but costs increase dramatically.
FEGLI Basic Coverage in Retirement
Upon retiring, employees must choose:
- 75% Reduction – Coverage drops by 2% per month until it stabilizes at 25%, and premiums stop at 65.
- 50% Reduction – Keeps half your benefit, but premiums continue.
- Full Coverage – Keeps 100% of your original benefit, but costs rise significantly.
📢 Best Strategy? Many retirees opt for a 75% reduction since it eliminates premiums while maintaining some coverage.
FEGLI Option B and C After Retirement
📌 Major Concern: Option B becomes prohibitively expensive in retirement.
💡 Example: A retired 80-year-old with $500,000 in Option B coverage would pay $37,440 annually—far exceeding most private insurance alternatives.
💡 Alternative Strategy: Many retirees replace FEGLI with a private term or whole-life policy to lock in fixed premiums for long-term affordability.
Private Term Life Insurance: A Better Alternative?
Private term life insurance provides fixed premiums for 10, 20, or 30 years, often at a lower cost than FEGLI—especially for healthy individuals.
💡 Cost Comparison: Private Term vs. FEGLI Option B
| Scenario | FEGLI Option B (50-year-old, $500,000 coverage) | Private 20-Year Term Policy (Healthy Non-Smoker) |
|---|---|---|
| Biweekly Premium | $0.13 per $1,000 = $65 biweekly | Fixed monthly premium |
| Annual Cost | $1,690/year | $840–$1,200/year |
| Total Over 20 Years | $33,800+ | $16,800–$24,000 |
📢 Key Takeaway: Private term insurance locks in lower rates over time, making it a better choice for younger, healthier employees.
Who Should Consider Private Insurance?
✅ Under 50: Lock in a low fixed premium with a private 20- or 30-year term policy.
✅ Good Health: Private policies cost significantly less if you qualify for “preferred” or “standard” health ratings.
✅ Long-Term Planning: Unlike FEGLI, private-term policies don’t increase every five years.
Should You Keep FEGLI or Switch to Private Insurance?
Stick with FEGLI if:
✔️ You have pre-existing health conditions that make private insurance expensive.
✔️ You need short-term coverage and don’t want to go through a medical exam.
✔️ You’re near retirement and will opt for the 75% Basic reduction to keep free coverage.
Consider private insurance if:
✔️ You’re under 50 and can lock in lower, fixed-term rates.
✔️ You need long-term coverage beyond retirement.
✔️ You want to avoid FEGLI’s escalating age-based pricing.
📌 Final Tip: Use the FEGLI Calculator to estimate and compare your future costs to private options.
Conclusion: Make the Smartest Choice for Your Future
FEGLI offers convenience and guaranteed acceptance, but its costs rise sharply with age. Private term life insurance provides lower, fixed premiums—making it a smarter financial move for many federal employees.
📢 Your Action Plan:
✅ Under 50? Get term life quotes and compare costs.
✅ Over 50? Review your FEGLI premiums and consider reducing coverage.
✅ Near Retirement? Plan for post-65 cost changes.
