Life Insurance: Government-Backed Or Private Sector?

Yes, the US government offers life insurance to federal employees and retirees, as well as their family members, through the Federal Employees' Group Life Insurance (FEGLI) Program. Established in 1954, it is the largest group life insurance program in the world, covering over 4 million people. Employees are automatically enrolled in basic life insurance unless they choose to waive coverage. In addition to the basic plan, there are three optional insurance plans available. The cost of basic insurance is shared between the employee and the government, while the employee pays the full cost of optional insurance. The Office of Federal Employees' Group Life Insurance (OFEGLI), a private entity contracted by the government, processes and pays claims under the FEGLI Program.

Historically, the US government offered life insurance to soldiers through the United States Government Life Insurance (USGLI) program, which was in place from 1919 to 1951. This program was created to support soldiers who may have been unable to obtain affordable life insurance due to the high risks associated with their occupation. Today, the Service Member Group Life Insurance program serves a similar function, providing insurance coverage for military personnel with premiums deducted from their regular pay.

Federal Employees' Group Life Insurance (FEGLI) Program

The Federal Employees' Group Life Insurance (FEGLI) Program is a group term life insurance program for Federal and Postal employees and retirees. Established on 29 August 1954, it 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.

The Office of Personnel Management (OPM) administers the Program and sets the premiums. OPM has a contract with the Metropolitan Life Insurance Company (MetLife) to provide this life insurance. The MetLife has an office called the Office of Federal Employees' Group Life Insurance (OFEGLI), which is a private entity that adjudicates claims under the FEGLI Program.

Most 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 options. New Federal employees are usually automatically covered by Basic life insurance, and their payroll office deducts premiums from their paycheck unless they waive the coverage. Basic Life Insurance is effective on the first day an employee enters a pay and duty status. 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 employee's age does not affect the cost of Basic insurance.

In addition to the Basic coverage, there are three forms of Optional insurance that can be elected: Option A (standard optional insurance), Option B (additional optional), and Option C (family optional insurance). Employees must have Basic insurance to elect any of the options. The cost of Optional insurance is paid in full by the employee and depends on their age. Employees have 60 days from the date of their appointment to elect additional Optional Insurance.

Once an employee elects life insurance coverage, their enrollment automatically continues each year as long as they remain eligible for the program. They do not have to re-enroll each year, but they can decrease their coverage at any time.

Basic life insurance

Most federal employees are eligible for FEGLI coverage, including part-time employees. However, temporary employees and those working on seasonal or intermittent schedules are not eligible. Basic life insurance coverage is effective on the first day an employee enters pay and duty status, unless waived before the end of their first pay period. Employees can waive or cancel Basic insurance at any time.

Basic insurance provides term life insurance at group rates. The Basic Insurance Amount (BIA) is calculated as the employee's annual basic pay rounded up to the next $1,000, plus $2,000. The cost of Basic insurance is shared between the employee and the government. Executive branch employees pay 2/3 of the total cost, while the government pays 1/3. The US Postal Service pays the entire cost of Basic coverage for its employees.

In addition to Basic insurance, there are three forms of Optional insurance that can be elected: Option A (standard optional insurance), Option B (additional optional), and Option C (family optional insurance). Employees must have Basic insurance to elect any of the optional coverages.

Optional insurance

The Federal Employees' Group Life Insurance (FEGLI) Program is a group term life insurance program for Federal and Postal employees and retirees. The program was established on August 29, 1954, and 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.

Most employees are eligible for FEGLI coverage and are automatically covered by Basic life insurance unless they choose to waive it. Basic life insurance is effective on the first day an employee enters a pay and duty status. 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 the remaining 1/3. An employee's age does not affect the cost of Basic insurance.

In addition to Basic coverage, there are three forms of Optional insurance that can be elected: Option A (standard optional insurance), Option B (additional optional), and Option C (family optional insurance). Employees must have Basic insurance to elect any of the Optional insurance plans. Unlike Basic, enrollment in Optional insurance is not automatic and employees must take action to elect the options. The cost of Optional insurance is paid in full by the employee and depends on their age.

Option A provides $10,000 of additional coverage.

Option B coverage comes in 1, 2, 3, 4, or 5 multiples of an employee's annual basic rate of pay.

Option C covers an employee's spouse for up to 5 multiples of $5,000 and/or eligible children for up to 5 multiples of $2,500.

Once an employee elects life insurance coverage, their enrollment automatically continues each year as long as they remain eligible for the program. Employees do not need to re-enroll each year, but they can decrease their coverage at any time.

United States Government Life Insurance (USGLI)

USGLI was a central pillar of the War Risk Insurance program, which subsidised the cost of life insurance for American soldiers. The premiums paid under this program were deposited into the United States Treasury and were used to cover the claims made by its policyholders. The program entitled all active military personnel to a life insurance policy payable by the federal government in the case of death or disability caused by war. The maximum face amount of a USGLI policy was $10,000, and it was closed to new issues on April 25, 1951.

USGLI policies could be retained by the insured even after their military service ended. As of 2013, there were approximately 8,000 active policies remaining, with the policyholders' average age at 88. All USGLI policies have been paid-up since January 1, 1983, meaning no further premiums are required, and annual dividends continue to be paid. The modern successor of the USGLI program is the Service Member Group Life Insurance program, which offers insurance coverage to United States military personnel for the duration of their service, with premium payments deducted from their regular pay.

Service Member Group Life Insurance program

Servicemembers' Group Life Insurance (SGLI) is a Department of Veterans Affairs program that provides low-cost group life insurance to all eligible military members. SGLI offers coverage of up to $500,000, with premiums as low as 6 cents per $1,000 of coverage. This includes a $1 monthly charge for Traumatic Injury Protection (TSGLI), which provides additional coverage of up to $100,000 in the event of traumatic injuries.

If you meet the eligibility criteria, you will be automatically signed up for SGLI. To be eligible for full-time SGLI coverage, you must meet at least one of the following requirements:

• You are an active-duty member of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard.
• You are a commissioned member of the National Oceanic and Atmospheric Administration (NOAA) or the U.S. Public Health Service (USPHS).
• You are a cadet or midshipman of the U.S. military academies.
• You are a member, cadet, or midshipman of the Reserve Officers Training Corps (ROTC) engaged in authorised training and practice cruises.
• You are a member of the Ready Reserve or National Guard, assigned to a unit, and are scheduled for at least 12 periods of inactive training per year.
• You are a volunteer in an Individual Ready Reserve (IRR) mobilisation category.

For those in non-pay status with the Ready Reserve or National Guard, there are additional requirements for eligibility. You must be scheduled for 12 periods of inactive training for the year and drilling for points rather than pay. It is important to note that you must pay your premiums directly in this case.

Once enrolled, you can manage your SGLI coverage through the SGLI Online Enrollment System (SOES). This allows you to choose your level of coverage, select your beneficiaries, and make any necessary changes. You can reduce your coverage in $50,000 increments or cancel it entirely.

When you leave the military, your SGLI coverage will remain in effect for 120 days. After that, you have the option to convert your SGLI to Veterans' Group Life Insurance (VGLI), which allows you to maintain your life insurance coverage after your military service. To be eligible for VGLI, you must meet at least one of several requirements, including having SGLI while in the military and applying within 1 year and 120 days of leaving the service.

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