Life Insurance for Federal Employees: Pros and Cons of FEGLI
Many U.S. Federal employees assume that Federal Employee Group Life Insurance (FEGLI) is the best plan available to them because they are automatically enrolled in the basic plan as soon as they become employed. Many even choose to add one of the additional three coverage options (Options A, B or C). But how do federal employees really know that they’re getting the most affordable plan and the best coverage available? Have they fully weighed the pros and cons of the plans? Are they aware of alternatives?
To help federal employees better understand FEGLI’s costs and benefits, we’ve come up with a list of FEGLI pros and cons. We hope that this list will help federal employees decide whether or not FEGLI is the best plan for their family.
Pros of FEGLI
- Convenience – You’re automatically enrolled in basic coverage, regardless of your age or health. You don’t have to take any medical exams, and you’re guaranteed coverage as long as you are employed with the government and pay the premiums. The premiums are also automatically deducted from your paycheck, so you don’t have to worry about making payments.
- Ability to choose coverage amount – The basic plan covers your salary rounded up to the nearest thousand plus $2,000, but you can choose to add more coverage. Option A adds $10,000 to your coverage, and Option B allows you to choose even more.
- Family coverage – Option C allows you to cover your spouse and your children in addition to yourself. Some other plans required you to have separate policies for each person.
Cons of FEGLI
- Cost – The additional coverage Options A, B and C are an additional cost to the basic plan and these premiums increase as you get older. The premiums for the coverage on your spouse and children are based on your age, not the age of your family members, so these costs also increase as you age. You’ll also have to pay an extra premium if you’d like to add Accidental Death and Dismemberment Insurance.
- Coverage may be temporary – You will only be eligible while you work for the federal government or if you retire from the government position. If you choose to leave your job or are terminated, you lose your FELGI coverage.
- Lack of options – Although FEGLI does offer a few options, it does not offer choices like Whole Life Insurance, Single Premium Whole Life or Universal Life Insurance. These policies offer features and benefits that are not included in FEGLI’s plans.
- Difficult to increase coverage – You can decrease your coverage amount at any time, but you can only increase during open enrollment periods, by taking a physical exam, or with a “Qualifying Life Event”. The last open enrollment was almost 10 years ago in September 2004, so it’s unwise to wait for these open seasons to increase your coverage.