The Best Insurance Solutions for Federal Employees

By Jay Shareef ChFEBC℠ and Chris Rhoads ChFEBC℠
 

How much do you know about your life insurance options? As a federal employee, you’re likely automatically enrolled in the Basic plan offered by the Federal Employee Group Life Insurance (FEGLI) Program, which is free for eligible employees.

But the Basic plan doesn’t provide much coverage, so you have options to consider when purchasing the right amount of life insurance to protect your family. FEGLI offers three optional plans in addition to the Basic plan. Even so, some federal employees choose to waive FEGLI benefits altogether and purchase life insurance through a private or non-profit company.

So how do you know what the best life insurance solution is for you?

Federal Employee Group Life Insurance (FEGLI)

FEGLI is the federal government’s group term life insurance program. The Basic plan insures your life up to whichever amount is greater: $2,000 plus your annual rate of basic pay rounded up to the next even $1,000, or $10,000. FEGLI also offers 3 optional plans in addition to the Basic coverage, the full cost of which is paid by you, the employee:

  • Option A insures your life up to an additional $10,000 worth of coverage.
  • Option B offers 1, 2, 3, 4, or 5 times the amount of your basic rate of pay rounded to the next even $1,000.
  • Option C insures the lives of your spouse and eligible dependent children, available in 1, 2, 3, 4, or 5 times the amount of coverage.

Because FEGLI is offered at group rates, it’s an affordable choice for many government employees. The premiums you pay are based on your age, so the premiums are low when you’re young. But the premiums increase incrementally as you get older and, unfortunately, the benefits decrease, so you end up paying more for less coverage as you age.

FEGLI does not offer cash value components because the program only offers term life insurance rather than whole life insurance, but it does offer its insured the benefit of continuing coverage after retirement. The premiums may decrease to 25% of the original amount of coverage over a period of time, but you’ll no longer have to pay premiums when you retire.

Private Life Insurance

For these reasons, many people shop for life insurance elsewhere to cover the needs of their family in the event of their death. Private life insurance offers several benefits, not the least of which is the option to carry a different type of life insurance than is offered by FEGLI which may work better for your situation.

As stated above, FEGLI only offers term life insurance, which ends coverage at the end of the policy term. Term life insurance works fine for most people, but some families prefer to carry whole life insurance instead. Whole life insurance offers the benefit of building up a cash value component, so part of the premiums you pay now will eventually be returned to your family.

If you ever leave your employment with the federal government, you’ll lose your FEGLI benefits. It can be a good idea to purchase life insurance from a private insurance company that will be there no matter where you’re employed. If you leave employment with the federal government when you’re middle-aged, you may find it difficult to purchase an affordable policy elsewhere.

Which Is Best For You? We Can Help You Decide

Deciding which option is best for you is dependent on your situation and your family’s needs. Although you can purchase up to 5 times your basic income through an optional FEGLI plan, most experts recommend your life insurance coverage should be 6-10 times your annual salary.[1] The decision of how much coverage you really need should be up to your family.

The good news is, you don’t have to choose between one or the other. You can enroll in the low-cost options of FEGLI while also carrying a life insurance policy from a private company. This option may help you lock in lower rates with a private company at a younger age, with the ability to increase your coverage down the road. There are many non-profit companies that offer group rates specifically to federal employees, so you may still be able to find affordable coverage.

Determining the amount of life insurance you need to protect your family is an important but complex process you shouldn’t have to navigate alone. If you don’t have an advisor helping you, partner with a firm like Certa Advisors that specializes in federal benefits. Reach out today at (301) 798-5250 or schedule a phone call now to learn more about how we can help.

About Jay

Jay Shareef is vice president, financial advisor, federal benefits consultant, and co-founder at Certa Advisors. As a U.S. Army veteran, Jay is passionate about helping federal employees create a bulletproof plan for retirement and navigate the often confusing and complicated federal benefits landscape. He spends his days educating and providing clients with unbiased insurance benefits and retirement strategies to help his clients create guaranteed income for life. As a problem-solver and trustworthy resource, Jay always puts his clients and their needs first so they can find financial peace of mind. He holds the Chartered Federal Benefits consultant (ChFEBC℠) credential. To learn more about Jay, connect with him on LinkedIn.

About Chris

Chris Rhoads is a co-founder and vice president of Certa Advisors. As a registered investment advisor and independent financial professional, Chris is committed to helping his clients in retirement and he takes a holistic approach to financial planning that includes insurance and risk management, investments and wealth management, retirement income planning, and estate and tax planning. He is a Chartered Federal Employee Benefits Consultant (ChFEBC℠) and he is currently pursuing the Chartered Financial Consultant® (ChFC®) designation through the American College of Financial Services. Chris has been married to his wife Tia since 2009 and they live in Frederick, MD together with their two young daughters. In his free time, Chris enjoys traveling, watching sports, and being active in causes he cares passionately about. To learn more about Chris, connect with him on LinkedIn.


[1] https://www.investopedia.com/articles/pf/06/insureneeds.asp

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