Fegli vs. Private Life Insurance

There’s really no question about whether it’s beneficial for new federal employees to stay in the Federal Employees’ Group Life Insurance (FEGLI) program which they are automatically enrolled into.  But it’s a good idea to know all your options FEGLI vs. Private Life Insurance, so perhaps you should take a look at the alternatives too.

In this case, the alternatives are private life insurance companies, so here’s a comparison of FEGLI vs. private life insurance.

FEGLI life insurance offers a lot of benefits, including automatic coverage for you and your family (if you opt for FEGLI Option C). The no-questions asked, guaranteed coverage is literally a life-saver for federal employees and their families if are older and/or have health issues and pre-existing diseases.

But in terms of price, private insurers are handily able to beat FEGLI premiums. Did you know you’re your FEGLI premiums will increase 20 times during your federal employment? By the time you retire and beyond, FEGLI coverage is actually far more expensive than your typical private life insurance policy with level premiums that you get to lock up when you buy it while still young, or younger.

Bottomline is that if you are a relatively healthy non-smoking male or female, you’ll be paying higher premiums that are subsidizing the costs of your less healthy colleagues in the federal workforce who smoke and are sicker, but still pay the same premium as you.

Disadvantages of FEGLI  Compare to Private Life Insurance

Also, FEGLI life insurance benefits can decrease dramatically after retirement, so you might end up with little coverage at exactly the time when you and your family need it. There’s also no cash value, so it’s not an investment vehicle.  The most annoying thing about FEGLI is that you cannot sign up or modify your coverage and options whenever you feel the need to do it. You have to wait for a FEGLI Open Season, or provide evidence of a qualifying life event (QLE).

Private insurers, on the other hand, are highly flexible when it comes to all this. You can sign up whenever you want, add more coverage as required, and opt for a life insurance policy that has cash and paid-up value.

The point of this FEGLI vs. private life insurance coverage is not to dissuade federal employees from staying with FEGLI. Rather, you should buy life insurance from private insurers in addition to your FEGLI coverage. This will ensure that you have the rock-solid cover under FEGLI, but also the flexibility and advantages of private life insurance.