Life Insurance For Federal Annuitants: Increasing Coverage Options

Federal annuitants in the United States can increase their life insurance coverage, but only while they are still employed. The Federal Employees' Group Life Insurance (FEGLI) Program, established in 1954, is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. FEGLI offers both Basic and Optional insurance coverage, with the Basic option serving as the foundation and the Optional coverages—Option A, Option B, and Option C—acting as additional protections. While Basic insurance is automatic for new federal employees, Optional insurance must be elected, and each type has unique requirements and costs. Importantly, federal annuitants cannot increase their life insurance coverage after retiring, so it is crucial to carefully evaluate insurance needs and select the appropriate coverage before retirement.

Federal Employees' Group Life Insurance (FEGLI) Program

The Federal Employees' Group Life Insurance (FEGLI) Program is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. The US Federal Government established the program on August 29, 1954.

FEGLI provides group term life insurance, which means it does not build up any cash value or paid-up value. It consists of Basic life insurance coverage and three optional forms of insurance. In most cases, new federal employees are automatically covered by Basic life insurance, with premiums deducted from their paycheck unless they waive coverage. The Basic insurance cost is shared between the employee and the government—the former pays 2/3 of the total cost, while the latter pays 1/3. Employees' age does not affect the Basic insurance cost.

The three forms of Optional insurance are:

• Option A – Standard: insures the employee’s life for an additional $10,000 on top of the Basic benefits.
• Option B – Additional: insures a federal employee or annuitant’s life with additional coverage that is equal to their salary, plus a multiplier between 1 and 5, and then that number is rounded up to the next thousand, and then another $1,000 is added.
• Option C – Family: insures the lives of the employee’s spouse and eligible dependent children (until they turn 22).

Unlike Basic insurance, enrollment in Optional insurance is not automatic—employees must take action to elect the options. Employees pay the full cost of Optional insurance, and the price depends on their age.

The FEGLI Calculator is a useful tool that allows users to determine the face value of various combinations of FEGLI coverage, calculate premiums for different coverage combinations, and see how choosing different options can change the amount of life insurance and premium withholdings. It also shows how life insurance carried into retirement will change over time.

Basic life insurance coverage

The Federal Employees' Group Life Insurance (FEGLI) Program, established in 1954, is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. Most federal employees are eligible for FEGLI coverage, which provides group term life insurance.

FEGLI is composed of two main parts: "Basic" and "Optional". Basic insurance coverage, also known as the Basic Insurance Amount (BIA), is automatically provided to new federal employees unless they waive it. The BIA is equal to the greater of the employee's salary rounded up to the next $1,000 plus $2,000, or $10,000. The federal government pays one-third of the premium cost of an employee's BIA, while employees pay the remaining two-thirds. Basic coverage does not build up any cash value and is not affected by age—the premium cost remains the same regardless of age or health factors.

In addition to Basic coverage, there are three forms of Optional insurance that can be elected: Option A (Standard), Option B (Additional), and Option C (Family). To be eligible for Optional insurance, employees must first have Basic insurance coverage. Unlike Basic insurance, enrollment in Optional insurance is not automatic, and employees must take action to elect these options. Employees pay the full cost of Optional insurance, which depends on their age.

Basic FEGLI provides the federal employee's/retiree's beneficiary with a death benefit slightly higher than the deceased's annual salary at the time of death. If the covered employee is under the age of 35, the amount of coverage is doubled, and between the ages of 35 and 45, the benefit gradually reduces by 10% per year until the age of 45, at which point there is no extra benefit.

Optional life insurance coverage

The Federal Employees' Group Life Insurance (FEGLI) Program is the largest group life insurance program in the world, covering over 4 million federal employees and retirees, as well as many of their family members. It was established on August 29, 1954, and most federal employees are eligible for FEGLI coverage.

FEGLI provides group term life insurance, which means it does not build up any cash value or paid-up value. It consists of Basic life insurance coverage and three optional forms of insurance: Option A, Option B, and Option C.

Basic Insurance Coverage

Basic insurance coverage is automatic for most new federal employees, and the payroll office deducts premiums from the employee's paycheck unless they waive coverage. The Basic option acts as the trunk of the "tree", with the three optional coverages as the branches. The cost of Basic insurance is shared between the employee and the government, with the employee paying 2/3 of the total cost and the government paying 1/3. The premium cost is not tied to any age or health factor, and employees can drop this coverage at any time.

If Basic insurance is waived, it can usually be re-added, but additional requirements will apply, such as a medical certification or a Qualifying Life Event (QLE). Examples of QLEs include marriage, birth or adoption of a child, etc.

Optional Insurance Coverage

Optional insurance coverage is not automatic and must be specifically elected within 60 days of becoming eligible. Employees must have Basic insurance coverage to elect any of the optional forms. The full cost of Optional insurance is paid by the covered federal employee or annuitant, and the cost depends on their age.

• Option A – Standard: Insures the employee's life for an additional $10,000 on top of the Basic benefits. The premium price depends on the federal worker's age, with younger employees paying less.
• Option B – Additional: Insures a federal employee or annuitant's life with additional coverage that is equal to their salary, plus a multiplier between 1 and 5, rounded up to the next thousand, and then an additional $1,000 is added.
• Option C – Family: Insures the lives of the employee's spouse and eligible dependent children (until they reach the age of 22). The premiums increase with age, similar to Option B.

The optional coverages may be continued in retirement by paying the prevailing premiums. It is important to evaluate your insurance needs and make prudent election decisions before selecting what options to carry into retirement. Annuitants should perform an analysis to determine if they are under or over-insured before reducing or canceling coverage.

Cancelling or reducing coverage

Federal retirees may cancel Basic or Optional life insurance coverage at any time. However, any cancellation or reduction of life insurance coverage must be in writing and have an original signature by the insured retiree. This means that if you want to reduce your life insurance coverage, you should only sign for the coverage you want to keep. If you want to cancel all life insurance coverage, you should sign in Box 5 of the Life Insurance Election Form, SF 2817.

It is important to note that if you have assigned your life insurance by transferring ownership to another person or company, you cannot cancel or reduce your Basic, Option A, or Option B coverage.

Before cancelling or reducing your coverage, it is recommended that annuitants review their Blue Book, "Your Federal Retirement Benefits," to determine what coverage they carried into retirement. Active employees should contact their HR office.

While federal retirees can cancel their life insurance coverage at any time, it is important to evaluate your insurance needs before making any decisions. Cancelling or reducing coverage could leave your family with burdensome debt or negatively impact your monthly income. Obtaining term insurance quotes from private insurance companies and comparing costs can help inform your decision.

It is also worth noting that you cannot increase your coverage after retirement or reinstate any coverage that you cancel.

Accidental Death and Dismemberment coverage

The Federal Employees' Group Life Insurance (FEGLI) Program is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. The program offers group term life insurance protection, which does not build cash or paid-up value and does not expire unless the policyholder cancels coverage.

Accidental Death and Dismemberment (AD&D) coverage is included in the Basic FEGLI coverage and Option A. This coverage provides additional funds in the event of a fatal accident or an accident that results in the loss of a limb or eyesight. To be eligible for benefits, the loss must occur within one year of the accident and be a direct result of bodily injury sustained, independent of all other causes.

AD&D insurance is provided at no additional cost and is automatically included in Basic and Option A insurance for employees. However, it is important to note that AD&D coverage ends when employment ends and cannot be carried into retirement. Additionally, accidental death benefits are not payable if the employee was engaged in actual combat or if nuclear weapons were involved at the time of the injury that caused their death.

Frequently asked questions