Having the distinction of being the world’s largest group life insurance program, the Federal Employees’ Group Life Insurance (FEGLI) Program covers over 4 million Federal employees, retirees, and many of their family members. And because the government foots 33% of the cost of FEGLI Basic premiums and there’s no medical exam required, it’s an excellent deal.
It’s a different story when it comes to FEGLI Option B, while it allows you to greatly increase your coverage, you pay for FEGLI Option B entirely out of pocket. As a result, there are a few good reasons to reconsider Option B coverage as you approach age 50.
Option B Premiums Increase As You Age
Premium rates for Option B are based on age, they begin to increase at age 35 and continue to do so every five years. Once you hit 50, premiums essentially double every 5 years. Additionally, coverage is based on the amount of your basic pay, so your Option B premiums increase with each pay raise. At some point, this renders the premiums so cost-prohibitive that the death benefit is less than all of the premiums you’ve paid over the years.
You Don’t Accumulate Any Cash Value
FEGLI Option B is term life insurance and doesn’t build cash value you can access. This means that if you cancel the policy because your beneficiary predeceased you, the premiums you’ve paid can’t be recovered. Similar term-life policies available in the private marketplace have more reasonable premiums for those over 50, and private permanent life insurance products are designed to build cash value while offering additional advantages.
Option B Death Benefit Caps Out At 5 Times Your Basic Annual Pay
As a primary earner, your survivors might depend on a life insurance death benefit to pay for funeral expenses, uncovered medical bills, mortgage payments, and school tuition. Federal employees who enroll in Option B can select amounts that are 1, 2, 3, 4, or a maximum of 5 times their basic annual pay. For many, the limited death benefit may not be enough to adequately provide for their survivors.
When you consider the downsides of FEGLI Option B, permanent life insurance offers a better overall value. Get in touch with an FRC® trained advisor who can help you explore life insurance products in the private marketplace.
