If you are planning to retire and are covered under the Federal Employees’ Group Life Insurance program, you have one last opportunity to check that coverage to make sure it matches your current and anticipated needs. Let’s look at your choices.

  • Basic insurance is equal to your annual basic pay rounded up to the next $1,000 plus $2,000. The cost is shared by you and the government. At retirement you will have four choices: drop the insurance, retain the full amount, or elect to have it reduced at age 65 by either 50 percent (1 percent per month) or 75 percent (2 percent per month) until the target level is reached. Regardless of the level of coverage you choose, until age 65 you will continue to pay the same amount per month as you did as an employee. However, if you choose the 50 percent or no reduction options, you will pay substantially more in premiums for the rest of your life, unless you later elect the 75 percent reduction or cancel your coverage.

  • Option A is worth $10,000, for which you pay the entire premium. Here your only choice is whether to keep the insurance at your own expense or drop it. The cost is high but the coverage is free after you reach age 65, when the face value will be reduced at a rate of 2 percent per month until it reaches zero. Note: You may only retain Option A insurance if you are keeping your Basic insurance.

  • Option B equals up to five times your annual basic pay rounded up to the next $1,000, for which you pay the entire premium. Here you’ll have three choices: drop the coverage, retain the full amount of coverage or elect a 50 percent reduction (2 percent per month). If you decide to retain coverage, you may reduce the number of multiples at that time. If you elect the 50 percent reduction, premium deductions will stop at age 65. Otherwise, those premiums will continue to rise.

  • Option C provides coverage at your own expense in multiples of $5,000 for your spouse and $2,500 for each eligible child. You can have up to five multiples. The rules and choices here are essentially the same as for Option B.

The big question is this: How much insurance do you want to carry into retirement? First you’ll have to assess your family needs. Then you’ll have to look at the costs. Clearly, the more insurance you carry, the greater will be your out-of-pocket costs. For example, Option B costs $.0607 per month per $1,000 of coverage (age 55-59) and $1.30 (age 60-64). The premiums continue to rise every five years until they reach $3.965 per $1,000 at age 80 and above. You can avoid paying those higher amounts by allowing the face amount to reduce by 50 percent beginning at age 65 or by canceling the coverage.

Even Basic insurance, where the costs shared between you and the government, can be an expensive proposition if you don’t elect the 75 percent reduction. You will pay $0.925 per month per $1,000 of coverage for the 50 percent reduction until age 65, when it drops to $0.60, and $2.155 per month per $1,000 for no reduction until age 65, after which it is drops to $1.83.

While the choices offered under FEGLI respond to a wide range of needs, the decision about what to do in each case is a personal one that only you can make. Make it wisely.

Editor’s Note:

As a federal employee, you do have options when choosing life insurance. WAEPA offers coverage from $25,000 up to $500,000 to Civilian Federal and U.S. Postal Service employees who are less than age 60 and who possess U.S. citizenship.

WAEPA can still provide you valuable benefits even if you

do not personally need any additional life insurance

coverage. As a WAEPA member (just pay a one-time $2.00

lifetime membership fee–no insurance purchase is

required on your part) your spouse and non-dependent adult

children automatically become eligible to apply for WAEPA’s

associate membership coverage from $25,000 up to $500,000,

even though they are not federal employees! This is an

extremely valuable benefit since FEGLI does not offer any

coverage to your non-dependent adult children, and FEGLI

coverage for your spouse is limited to a maximum of only

$25,000.

For more information on WAEPA and your life insurance options, go

to http://www.waepa.org or them call toll free 1-800-368-3484 if you

have questions and would like to speak to a customer service

representative.