As federal employees and retirees, when we think about insurance, it’s usually about the Federal Employees Health Benefits program. Less often thought about is the Federal Employees’ Group Life Insurance program. That’s the one under which you are covered automatically for Basic insurance when you get you first federal civilian job. And it’s provided to you without the need of a medical exam.
Of course, you’re given an opportunity to decline that coverage but not too many do. So, this article is going to be a refresher course for those of you who didn’t decline Basic coverage. Next time I’ll do the same for those of you who elected additional coverage.
Basic Insurance
Your Basic insurance amount is equal to your annual basic salary rounded up to the next higher $1,000 plus $2,000. For example, if your basic salary is $67,450, your coverage would be $70,000 ($68,000+$2,000). The cost of the premiums is shared by you and the government. Your share is 15 cents biweekly per $1,000 of coverage or 32.5 cents per month. (Note: The Postal Service pays the entire cost of Basic coverage for its employees.)
In addition, your policy includes coverage for accidental death and dismemberment. AD&D pays the full amount of your Basic coverage if you die or lose two or more body parts – for example, a hand, foot, eye, etc. – and half that amount for the loss of one part. Of course, if you die, this payment is in addition to the amount of your Basic coverage. However, AD&D coverage declines once you are over age 35 until it reaches half the face value of your policy at age 45 or over. AD&D coverage stops when you retire.
Speaking about retirement, when you do retire, you’ll be given some choices. You can retain the full value of the coverage you had on the day you retired, allow it to decline to half its value or let it decline to 25 percent. If you chose the latter option, when you reach age 65 you will no longer have to pay any premiums but your coverage will decrease by 2 percent per month until it hits the 25 percent level. That’s where it will stay until you pass on.
If you choose the 50 percent option, your annuity will decline by only 1 percent per month until it reaches the halfway point. The cost to you would be $0.925 per month per $1,000 of coverage until you reach age 65 and $0.60 per $1,000 thereafter.
Of course, if you choose the no reduction option, your premiums would be higher still. You’d pay $2.155 per month per $1,000 of coverage until age 65 and $1.83 per $1,000 thereafter.
As a rule, you can change your mind if you chose either of the last two options at retirement. If you do, the level of your coverage will drop to what it would have been had you elected the maximum reduction and you will no longer have to pay any premiums. There is an exception to this rule, which involves the assignment of benefits. I’ll discuss that in the fourth article in this series.
A closing word. If you are covered by Basic insurance and you die, the proceeds will be paid to the beneficiary you designated on a Standard Form 2808 (CSRS) or 3102 (FERS). So it will pay you to keep that designation current, because the person you designated when you were first hired may not be the one you want to receive that money now.