In my last article, I offered a refresher course on Option A-Standard coverage available under the Federal Employees’ Group Life Insurance program. This time I want to discuss Option B. As I pointed out last time, while the government pays one-third of the cost of Basic insurance premiums, you are responsible for paying 100 percent of the premiums if you enroll in any of the life insurance options. Despite that fact, you are still getting a good deal because the government has been able to negotiate lower premiums.
Option B is called Additional Optional insurance. It allows employees who are covered by Basic insurance to elect additional amounts of coverage that are equal to one, two, three, four or five times their rate of basic pay, rounded to the next higher $1,000. This additional coverage can be a real advantage and provide peace of mind if you need to provide for a large family or foresee the possibility of uninsured medical costs, funeral expenses, debts and/or taxes if you were to die sooner than later.
If you are an employee, the bi-weekly premiums vary by age and range from $0.03 per $1,000 of coverage at age 35 and ending at $2.40 per $1,000 at age 80 or above.
When you retire, you have a choice to make. You can either elect a full reduction in your Option B multiples or no reduction at all. If you chose the full reduction, your premiums will stop and your coverage will decline by 2 percent per month for 50 months until it reaches zero. That reduction will start either at the second month after your 65th birthday or when you retire, whichever is later.
On the other hand, if you are a retiree who decides to keep the full value of your Option B coverage, the monthly premiums will depend on the age at which you retire. They’ll be the monthly equivalent of what you paid as an employee up to age 65. After that they’ll range between $1.56 and $5.20 depending on your age.
Whether you are an employee or a retiree who elects no reduction, full coverage and the payment of premiums will continue until you cancel the coverage, which you can do unless you have assigned that benefit to another–something we’ll discuss in a future article.