Key Takeaways
- FEGLI offers continued life insurance options for federal retirees, but coverage features and costs can change significantly after leaving service.
- Reviewing your personal insurance needs and understanding other federal benefits is key to deciding whether to keep FEGLI in retirement.
As a federal employee preparing for or already enjoying retirement, weighing your Federal Employees’ Group Life Insurance (FEGLI) options is an important step. Understanding how FEGLI functions in retirement, along with its pros and cons, can help you make confident, informed choices about continuing or adjusting your coverage after you leave federal service.
What Is FEGLI in Retirement?
FEGLI coverage overview
Federal Employees’ Group Life Insurance (FEGLI) is the largest group life insurance program in the world, managed by the Office of Personnel Management (OPM). If you participated in FEGLI during your federal career, you likely had Basic coverage and may have chosen additional options such as Option A (Standard), Option B (Multiple of Salary), or Option C (Family Coverage).
FEGLI provides term life insurance, meaning it pays a benefit upon your passing but does not accumulate cash value. The bulk of federal retirees carry FEGLI into retirement, but the decision to keep, reduce, or drop coverage can have long-term effects.
How FEGLI changes after retirement
When you retire, many aspects of your FEGLI coverage remain familiar, but several key factors change. Most notably, premiums for some coverage options rise as you age, and coverage amounts may decrease over time—especially if you select certain reduction options. After retirement, you can no longer increase your FEGLI coverage or add new options; your choices are limited to reducing or cancelling coverage, or allowing reductions to occur per the choices you make at retirement.
How Does FEGLI Work After Service?
Eligibility requirements for retirees
To continue FEGLI into retirement, you must meet the following OPM requirements:
- You were insured under FEGLI for at least the five years immediately before your retirement date, or for your full period of federal service if less than five years.
- You retire on an immediate annuity (not a deferred retirement).
If you meet these guidelines, you can carry your FEGLI coverage forward. However, if you do not meet the five-year rule, your coverage ends, and there are no exceptions except for certain qualifying federal disability retirements.
Coverage reduction choices and options
At retirement, you choose how your FEGLI Basic and optional coverages will continue. With Basic coverage, you select one of three reduction options:
- 75% Reduction: Your coverage amount gradually drops by 75% (in 2% monthly steps after age 65 or retirement, whichever comes later), but you stop paying premiums for this portion after that point.
- 50% Reduction: Your coverage drops by half over time, with a smaller portion of premiums continuing.
- No Reduction: Your Basic coverage stays at the full pre-retirement amount, but premiums for this option continue for life and are considerably higher.
For Options A, B, and C, the typical default is for coverage to decrease with age—often after age 65 or retirement—unless you elect to pay higher premiums to keep coverage unchanged. Once set, these choices are generally irrevocable.
What Are the Pros of Keeping FEGLI?
Simplicity of maintaining coverage
FEGLI is designed to be easy to maintain throughout your federal career and into retirement. There is no new application, and you do not need to re-qualify based on age or health. Premium payments can simply be deducted from your annuity. This convenience can be appealing if you want continuity or don’t want to shop for new life insurance policies.
No medical underwriting in retirement
One significant advantage of FEGLI for retirees is that no new medical exams or health questions are required to continue your coverage after leaving federal service. This feature can be especially valuable if you have developed health concerns and may not qualify for comparable individual life insurance elsewhere, or would face high costs due to age or medical history.
What Are the Cons of Keeping FEGLI?
Increasing FEGLI costs in retirement
While FEGLI’s pricing structure is transparent and regulated by OPM, the cost of certain options, particularly Option B (Multiple of Salary), can rise a great deal as you age. After age 65 or retirement, premium increases are substantial for those who choose to maintain full coverage and avoid the automatic reductions. Weigh these escalating costs carefully in light of your budget and needs.
Coverage reductions over time
If you select one of the reduction options (commonly the 75% reduction), your insurance amount declines steadily over time starting at age 65 or retirement. For many retirees, this means your “safety net” may shrink at the same time as your beneficiaries could face greater need. Only by choosing—and paying for—No Reduction do you keep the full level of Basic coverage in retirement.
Is FEGLI Still Needed After Retirement?
Assessment of personal insurance needs
There’s no single answer to whether FEGLI should be kept after you retire. Factors to consider include outstanding debts, your spouse’s or dependents’ future needs, funeral or estate expenses, and the presence of other resources or private insurance. Some retirees may find their needs have diminished and opt for reduced or no FEGLI; others may wish to maintain higher levels of coverage for peace of mind.
Federal survivor benefits and other resources
Remember: FEGLI is just one piece of your federal retirement security. Survivor benefits from your federal pension (CSRS or FERS), Social Security, Thrift Savings Plan disbursements, and health coverage under FEHB or Medicare can all contribute to your family’s long-term security. Assess the totality of your available resources when deciding on life insurance—FEGLI or otherwise.
Alternatives to FEGLI for Retirees
Other life insurance considerations
Some retirees consider individual term or permanent life insurance for flexibility, features, or targeted legacy planning. These private policies can offer consistent death benefits or cash value accumulation, but typically require medical underwriting and may be more expensive for older applicants or those with health conditions. Keep in mind, no commercial product is sponsored or endorsed by the federal government.
Federal benefit coordination
If you have both FEGLI and other life insurance or benefits, review how they coordinate. The right mix depends on your age, health, financial goals, survivor needs, and what you already have in place. FEGLI offers government-regulated group protection, but alternatives may be better suited for those seeking additional features or coverage amounts beyond what FEGLI provides.
