FEGLI — the Federal Employees’ Group Life Insurance program — is the largest group life insurance program in the world, covering over 4 million federal employees and retirees. It is administered by the Office of Personnel Management (OPM) and underwritten by MetLife. If you are a federal employee, you are likely automatically enrolled in Basic coverage unless you waived it when you first became eligible.
How FEGLI Coverage Works
FEGLI consists of Basic coverage and three Optional coverages:
- Basic: Equal to your annual basic pay rounded up to the next $1,000, plus $2,000. The government pays approximately one-third of the Basic premium; you pay the remaining two-thirds. Basic coverage is automatic unless waived.
- Option A – Standard: An additional flat $10,000 of coverage. You pay the full premium, which is age-banded.
- Option B – Additional: Coverage equal to one, two, three, four, or five times your annual basic pay (rounded up to the next $1,000). You pay the full premium, which increases at each five-year age band. Option B is the most expensive FEGLI option and the one most likely to become financially unsustainable in retirement.
- Option C – Family: Coverage for your spouse and eligible dependent children. Each multiple provides $5,000 for your spouse and $2,500 per eligible child, in multiples of one through five. You pay the full premium.
You must have Basic coverage to elect any Optional coverage. Optional coverage is not automatic — you must elect it within 60 days of becoming eligible.
Why FEGLI Premiums Become a Problem
FEGLI’s Basic coverage uses a composite (level) premium structure — meaning all enrollees pay the same rate per $1,000 of coverage, regardless of age. This makes Basic relatively affordable during active service. However, Optional coverages (A, B, and C) are age-banded, meaning premiums increase at five-year intervals throughout your career and into retirement. The most recent FEGLI rate adjustment was effective October 1, 2021.
The core problems with FEGLI from a financial planning standpoint:
- Premiums increase every 5 years for Optional coverages
- Premiums increase sharply at retirement — particularly for Option B — as you transition from payroll deduction to direct billing and move into higher age bands
- FEGLI is based on your salary — Basic coverage is capped at 5× your base salary (1× Basic + 4× Option B), while most financial professionals recommend 7–20× your income depending on age and obligations
- No underwriting advantage — FEGLI rates are the same for everyone in the group, regardless of health. If you are in good health, a fully underwritten private policy will typically offer significantly lower premiums for comparable coverage
Premium Comparison: FEGLI vs. Private Term Life Insurance
The following example illustrates how dramatically FEGLI costs can escalate over a career compared to a private level-premium term policy. Assumptions: 50-year-old male federal employee, $100,000 annual salary, maximum Option B coverage ($500,000 = 5× salary), preferred non-smoker risk class, 30-year coverage horizon, retires at age 65.
FEGLI Option B premiums (approximate, based on current OPM age-band rates):
- Ages 50–54: approximately $1,820/year ($70/pay period)
- Ages 55–59: approximately $3,640/year ($140/pay period)
- Ages 60–64: approximately $7,800/year ($300/pay period)
- Ages 65–69: approximately $9,360/year ($780/month, post-retirement)
- Ages 70–74: approximately $15,600/year ($1,300/month)
- Ages 75–79: approximately $23,400/year ($1,950/month)
- Total 30-year outlay: approximately $308,100
Private 30-year level-premium term policy ($500,000), same applicant at preferred rates:
- Level premium for all 30 years: approximately $1,900–$2,200/year (varies by carrier)
- Total 30-year outlay: approximately $57,000–$66,000
The difference is significant — a private term policy locked in at age 50 in good health typically costs 75–80% less over 30 years than maintaining comparable FEGLI Option B coverage through retirement. The private policy also provides a guaranteed level premium with no risk of future rate increases.
FEGLI at Retirement: Your Options
When you retire, if you have been enrolled in FEGLI for at least five years immediately before retirement (or since first eligible) and are entitled to an immediate annuity, you may continue your coverage. For Basic insurance, you have three election choices:
- 75% Reduction: Coverage reduces by 2% per month after age 65 until it reaches 25% of its original value, at which point you pay no further premiums. This is the most common election.
- 50% Reduction: Coverage reduces by 1% per month after age 65, stopping at 50% of the original value. Reduced premiums continue for life.
- No Reduction: You maintain 100% of your original Basic coverage for life, at significantly higher ongoing premiums.
Optional coverages (A, B, and C) can also be continued into retirement, but the age-banded premiums continue to rise. Many retirees find that Option B becomes unaffordable within the first several years of retirement.
When Does It Make Sense to Replace FEGLI?
Replacing FEGLI coverage with a private policy makes the most sense when you are still in good health and able to qualify for preferred or preferred-plus rates. The window for this decision is typically between ages 40 and 60 — before premiums on a private policy become significantly more expensive and before health changes may limit your insurability.
Factors that favor replacing FEGLI Option B with private coverage:
- You are in good health and can qualify for a preferred or better risk class
- You have 10–20+ years until retirement and want to lock in level premiums
- Your financial needs (mortgage, dependents, income replacement) will extend well into retirement
- You want portability — private coverage is not tied to federal employment
Factors that favor keeping FEGLI:
- Health conditions that would make individual underwriting difficult or expensive
- You are close to retirement and your coverage need will be short-term
- You elect the 75% reduction option on Basic, which eventually becomes premium-free
How to Compare Your FEGLI Premiums
OPM provides a FEGLI Calculator on their website where you can model your own coverage amounts and see projected premium costs at each age band through retirement.
To compare FEGLI against private term or permanent life insurance, give us a call at 1-888-972-0024 or send us an e-mail. We represent over 40 top-rated carriers and can show you side-by-side what a private policy would cost for your age, health profile, and coverage amount — at no cost to you.