What is FEGLI & How Does it Work?

Planning for financial security goes beyond understanding your pension, TSP, and retirement eligibility. For many federal employees, life insurance is a major part of protecting their family’s future — and the primary life insurance program available is FEGLI, the Federal Employees’ Group Life Insurance program.

Whether you’re early in your federal career, nearing retirement, or somewhere in between, understanding how FEGLI works is essential for making informed decisions. This comprehensive guide breaks down FEGLI in simple terms: what it is, how it works, how coverage is calculated, the pros and cons, and what options you have at retirement. Let’s get started.

What Is FEGLI and How Does It Work?

A Complete Guide for Federal Employees

In this article we will cover:

What is FEGLI & How Does it Work?
FEGLI Coverage Types & Costs Explained
How to Enroll in FEGLI
How FEGLI Premiums Work
Is FEGLI a Good Deal? - Advantages & Disadvantages
Keeping FEGLI in Retirement, Should I Do It?
FEGLI Optional Coverage at Retirement vs Private Coverage
Common Mistakes Federal Employees Make with FEGLI

FEGLI stands for the Federal Employees’ Group Life Insurance program. It was established in 1954 and is the largest group life insurance program in the world, covering more than 4 million federal employees, retirees, and their families. It is administered by the Office of Personnel Management (OPM) and insured by Metropolitan Life Insurance Company (MetLife).

Unlike private life insurance, FEGLI is:

• Group-based

• Automatic for new employees (Basic coverage)

• Payroll-deducted

• Guaranteed-issue, meaning no medical exam is required for initial enrollment

• FEGLI offers a mix of basic and optional coverage that federal employees can customize based on age, needs, and family circumstances.

What is FEGLI?

How FEGLI Works

FEGLI is a term life insurance program, meaning it provides coverage but does not build cash value. Your premiums essentially “rent” coverage as long as you remain employed or retired under the federal system and meet eligibility rules.

Here’s the simple breakdown of how it works:

• You choose your coverage type(s).

• Premiums are automatically deducted from your paycheck every pay period.

• Your beneficiaries receive a tax-free payout if you pass away.

• When you retire, you may choose to continue Basic coverage and certain options.

FEGLI’s structure includes:

• Basic Coverage (automatic)

• Optional Coverage (A, B, and C)

Each option provides different amounts of coverage and has different cost structures.

FEGLI Coverage Types Explained

1. Basic FEGLI Coverage

All newly hired eligible federal employees are automatically enrolled in Basic coverage unless they waive it.

How Basic Coverage Works:

• Basic coverage equals:

• Your annual basic pay (rounded up to the next $1,000) + $2,000

Example:
If your salary is $63,400 → rounded to $64,000 → Basic = $66,000.

Cost of Basic Coverage:

• You pay $0.15 per $1,000 of coverage every two weeks.

• Your agency pays one-third of the cost.

Extra Benefit (if under age 45):

Employees under age 45 automatically receive extra coverage at no additional cost:

• Age 35 or under: double Basic

• 36–45: gradually declining bonus coverage

This makes Basic FEGLI extremely valuable for younger employees.

2. Option A (Standard Optional Insurance)

Option A provides an additional $10,000 of coverage.

Cost:

• Premiums are based on age and increase in five-year bands.

• Option A is simple but often not enough coverage on its own — however, it can be a helpful supplement to Basic insurance.

3. Option B (Additional Optional Insurance)

Option B lets you choose 1 to 5 multiples of your annual basic pay.

Example:

If you earn $80,000 and choose 5 multiples → coverage = $400,000.

Cost:

Premiums increase every five years and become expensive with age, especially after 55.
This is the option most federal employees review closely before retirement because the cost jumps significantly later in life.

4. Option C (Family Optional Insurance)

Option C covers your spouse and dependent children.

You can elect 1 to 5 multiples, where each multiple equals:

• $5,000 for your spouse

• $2,500 per dependent child

Example:
If you choose 3 multiples → spouse = $15,000, each child = $7,500.

Cost:
Premiums rise with age (every five years).
Option C is designed as an affordable way to add basic family coverage but is not a replacement for private insurance.

You automatically receive Basic coverage when hired. To change your coverage:

You can elect Optional Coverage:

• Within 60 days of your hiring

• During a rare FEGLI Open Season

• After a Qualifying Life Event (marriage, divorce, birth, etc.)

• By undergoing a physical exam, if approved

Because open seasons are infrequent (the last was in 2016), most employees must elect or increase coverage early in their career or qualify through life events.

How to Enroll in FEGLI

FEGLI premiums are determined by:

• Your age

• Type(s) of coverage elected

• Number of multiples (Options B and C)

FEGLI premiums increase at ages:
35, 40, 45, 50, 55, 60, 65, 70, 75, and 80.

Basic coverage stays relatively stable, but Optional coverage — especially Option B — gets significantly more expensive over time.

This is one of the main reasons employees review their coverage as they approach mid-career or retirement.

How FEGLI Premiums Work

The answer depends on your situation, age, and financial needs. Here are the main advantages and drawbacks:The answer depends on your situation, age, and financial needs. Here are the main advantages and drawbacks:

Is FEGLI a Good Deal?

Advantages of FEGLI

1. Guaranteed Acceptance: No medical exam required for Basic or early-career Optional coverage.

2. Affordable for Younger Employees: Basic is subsidized; Optional coverage is inexpensive early in your career.

3. Easy to Use: Premiums are payroll-deducted and coverage is automatic.

4. Family Coverage Available: Option C provides immediate family protection at group rates.

5. Portable Into Retirement (Basic Coverage): You can continue Basic into retirement if you meet the three FEGLI retirement rules.

Disadvantages of FEGLI

1. No Cash Value: FEGLI is not an investment — it is term insurance only.

2. Costs Rise with Age: Optional coverage becomes expensive, especially after age 55.

3. Limited Options at Retirement: Option B and C generally drop or become costly after age 65.

4. No permanent insurance options: FEGLI does not offer whole life or guaranteed lifetime policies.

To continue Basic FEGLI as a retiree, you must meet the “5-Year Rule”:

1. Be covered by Basic FEGLI at retirement

2. Have been covered by Basic FEGLI for the 5 years immediately before retirement (or since your first opportunity to enroll)

3. Retire with an immediate retirement — not deferred

What Happens to FEGLI Basic at Retirement?

You choose one of three reduction levels:

75% Reduction

• Most popular

• Your coverage reduces to 25% of original value after age 65

• No premium after age 65

50% Reduction

• Coverage reduces to 50% of original

• Very small premium after 65

No Reduction

• Full coverage for life

• Highest cost in retirement

Keeping FEGLI in Retirement

Should You Keep FEGLI in Retirement?

FEGLI can be a good option depending on:

• Your age

• Health

• Financial needs

• Family situation

• Whether you want permanent coverage

FEGLI Basic

• Often worth keeping — the 75% reduction option is inexpensive and provides a guaranteed benefit for life.

• Optional Coverage

• Often becomes too expensive and may be replaced by more economical private policies.

Option A:

Continues into retirement and drops to $2,500 at age 65.
Premiums stop at age 65.

Option B:

You can continue it, but:

• Premiums rise steeply

• You can elect to reduce multiples at age 65

• Many retirees drop Option B due to cost

Option C:

You may keep it, but coverage reduces and premiums stop at 65.

FEGLI Optional Coverage at Retirement

FEGLI vs. Private Life Insurance

Many federal employees ask:

“Should I keep FEGLI or buy private insurance?”

Here’s a simple comparison:

FEGLI Strengths

• Great for younger employees

• Guaranteed coverage

• No health questions for initial enrollment

• Convenient payroll deductions

Private Insurance Strengths

• Can offer level premiums (cost does not rise with age)

• Can offer permanent coverage (FEGLI cannot)

• May be cheaper later in life

• More customizable

Most employees benefit from reviewing FEGLI every 5–10 years and comparing it with private insurance, especially after age 50.

1. Waiting too long to review coverage

2. Keeping Option B too late into their career

3. Not understanding the 5-year rule for retirement

4. Assuming FEGLI is always the best option

5. Failing to update beneficiaries

A periodic benefits review can avoid costly mistakes.

Common Mistakes Federal Employees Make with FEGLI

FEGLI is a valuable benefit for federal employees, offering simple, automatic, and affordable life insurance early in your career. But like any insurance program, its value changes over time.

Understanding what FEGLI is, how it works, what it costs, and how it fits into your retirement planning is essential for protecting your family and building long-term financial security.

Whether you choose Basic only, add Optional coverage, or combine FEGLI with private life insurance, the key is to make informed choices — not automatic ones. Click below to consult a licensed financial professional who can properly guide you regarding your choice of FEGLI options.

Main Take-Aways From This Research

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