Life Insurance for Federal Employees: Advantages and Disadvantages of FEGLI

Many US 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 are hired. Many even choose to add one of three additional coverage options (Option A, B or C). But how do federal employees really know they’re getting the most affordable plan and coverage available? Have they fully weighed the pros and cons of the plans? Are they aware of alternatives?

To help federal employees better understand the costs and benefits of FEGLI, we’ve put together a list of FEGLI pros and cons. We hope this list will help federal employees decide whether or not FEGLI is the best plan for their family.

Advantages of FEGLI

  • Ease – You are automatically enrolled in basic cover, regardless of your age or health. You don’t have to take any medical exams and you’re guaranteed coverage as long as you work for the government and pay the premiums. The premiums are also automatically deducted from your salary, so you don’t have to worry about payments.
  • Ability to choose cover amount – The basic plan covers your salary rounded 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 lets you choose even more.
  • Family Coverage – With option C you can also insure your partner and your children in addition to yourself. Some other plans required you to have a separate policy for each person.

Disadvantages of FEGLI

  • Cost – The additional Option A, B and C coverages are an additional cost to the basic plan and these premiums increase as you get older. The premiums for your spouse and children’s coverage are based on your age, not the age of your dependents, so these costs also increase as you get older. You will also have to pay an additional premium if you want to add death and mutilation insurance.
  • Coverage may be temporary – You are only eligible while working for the federal government or when you retire from the government. If you choose to leave your job or are laid off, you will lose your FELGI coverage.
  • Lack of options – While FEGLI offers some options, it does not offer choices such as life insurance, single premium, or universal life insurance. These policies offer features and benefits not included in FEGLI’s plans.
  • Difficult to increase coverage – You can decrease your coverage amount at any time, but you can only increase it 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.