FEGLI Explained: How Much Life Insurance Do Federal Employees Actually Need?

When you started your federal job, you were automatically enrolled in FEGLI Basic coverage. You may have added Option A, B, or C at some point. And then — like most federal employees — you probably haven’t thought about it since.

That’s a problem. Because FEGLI premiums increase dramatically with age, and the coverage that was appropriate at 35 may be significantly over- or under-sized by the time you’re approaching retirement. Here’s what every federal employee needs to understand.

The Four FEGLI Coverage Options

Basic Coverage (Automatic)

When you’re hired, you’re automatically enrolled in Basic FEGLI unless you waive it. Coverage is equal to your annual basic pay rounded up to the next $1,000, plus $2,000. So if your salary is $87,500, your Basic coverage is $90,000.

The government pays one-third of the Basic premium; you pay two-thirds. The cost is relatively low when you’re young, but increases significantly as you age — particularly after 35 and again at 45, 50, 55, and 60.

Option A — Standard ($10,000)

A flat $10,000 of additional life insurance. Premium cost is low but the benefit is fixed — it doesn’t scale with your salary. Many employees carry this without realizing how small $10,000 of coverage actually is relative to their financial obligations.

Option B — Additional

This is where FEGLI gets expensive and where the most decision-making is required. Option B lets you elect 1x, 2x, 3x, 4x, or 5x your annual salary in additional coverage. At a young age, the premiums are relatively affordable. But they increase in five-year bands — and the jump at age 50 and beyond can be substantial.

Option B premiums are paid entirely by the employee (no government contribution). At 5x salary for a GS-13, you could be paying several hundred dollars per month in your 50s — premiums that rival or exceed private term life insurance.

Option C — Family

Provides coverage for your spouse and eligible dependent children. Spouse coverage comes in multiples of $5,000 (up to $25,000); child coverage is $2,500 per child per unit. Also employee-paid, with age-based premium increases.

The Big Problem: Premiums After 50

FEGLI Option B is priced in five-year age bands. The premium per $1,000 of coverage increases at 35, 40, 45, 50, 55, 60, and 65. By age 60+, the cost per thousand of FEGLI Option B coverage often significantly exceeds what a healthy individual could obtain through private term life insurance.

Many federal employees carrying 5x Option B into their late 50s are substantially overpaying for coverage they may not need — especially once their mortgage is paid off, children are independent, and retirement savings are established.

FEGLI in Retirement: Three Choices for Basic Coverage

When you retire, you have three options for your Basic FEGLI coverage, which you elect at retirement and cannot change afterward:

1. 75% Reduction: Coverage reduces by 2% per month starting at age 65 until it reaches 25% of the original amount. No premium cost after 65.
2. 50% Reduction: Coverage reduces to 50% of the original amount at age 65. Small premium continues after 65.
3. No Reduction: Coverage stays at 100% for life. Requires a premium payment for the rest of your life.

The Right Question: How Much Coverage Do You Actually Need?

The purpose of life insurance is income replacement — protecting dependents who rely on your income. As you approach and enter retirement, the life insurance calculation changes:

• Your FERS pension includes a Survivor Benefit option that protects your spouse’s income after your death — which replaces some of what life insurance provides
• If your mortgage is paid and children are independent, your income replacement need is lower
• If your spouse has independent income or savings, your need is lower still
• If you have dependents relying on your income, the calculation is different

The mistake isn’t carrying too much or too little — it’s carrying whatever you enrolled with at age 25 without ever revisiting whether it still fits.

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Sources: OPM Federal Employees Group Life Insurance. This article is for educational purposes only and does not constitute financial, legal, or retirement advice.