Thinking about your own mortality is rarely pleasant. But for those with families or other dependents, the prospect of dying unexpectedly—and leaving financial burdens for your loved ones in the process—can be even more chilling. Term life insurance can provide an extra layer of security, ensuring that your loved ones will have access to the assets they need to pay funeral expenses and other debts after your passing.
Federal employees have access to a unique type of life insurance—Federal Employees' Group Life Insurance (FEGLI). Below, learn more about some benefits of this life insurance program and how to make sure you and your loved ones are protected.
What is FEGLI?
For nearly 70 years, FEGLI has provided group term life insurance to federal employees, and currently covers more than four million employees, retirees, and their family members. Most federal employees are eligible to purchase FEGLI coverage beyond the basic coverage provided to all new federal employees.
FEGLI comes in four forms:
- Basic. All new federal employees, and some long-term ones, are covered by FEGLI's Basic option unless the employee has waived coverage. The employee pays two-thirds of the cost of this coverage while the federal government pays the remaining third. Unlike many life insurance policies that charge more for age—including the optional FEGLI coverages—your age will not affect how much your Basic insurance costs.
- Standard. If you are enrolled in the Basic program already, you can choose additional coverage under the Standard option. Standard insurance provides an additional $10,000 of coverage, with the coverage rate based on your age. For example, each $10,000 of Standard coverage will cost $0.43 per month for someone under age 35, $4.33 per month for someone age 55 to 59, and $13.00 per month for someone over age 60.
- Additional. Additional coverage provides benefits of one to five times your salary, with a flat withholding amount per $1,000 of coverage based on age. Older employees or higher earners will generally pay more for this coverage than younger or low-earning employees.
- Family. Eligible federal employees who elect Family coverage can also purchase life insurance for their spouse (up to $25,000) and eligible dependents (up to $12,500).
Because FEGLI is a group term life insurance policy, it does not build up any cash value the way whole life insurance policies do. However, FEGLI premiums are deducted post-tax—which means that any benefits paid to you or your family under the life insurance policy are not taxable.
If you or a loved one needs to submit a FEGLI claim, these claims go to the Office of Federal Employees' Group Life Insurance (OFEGLI), a third-party company that contracts with the government to process and pay these claims. Your financial professional can work with you to evaluate the coverage options available and see which, if any, make sense for your situation.
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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