5 Signs That You Might Be Paying Too Much for FEGLI Life Insurance

Missy E
November 14, 2025

Key Takeaways:

FEGLI premiums increase significantly as you age, which could mean you’re overpaying for coverage that may no longer fit your needs.
There are alternative ways to secure life insurance that might be more cost-effective while still providing the coverage you need.

Are You Overpaying for FEGLI? Here’s How to Tell

The Federal Employees’ Group Life Insurance (FEGLI) program has been a staple for federal employees for decades, offering basic and optional life insurance coverage. But just because it’s the default option doesn’t mean it’s the best fit for you—especially as costs increase over time. If you’re nearing retirement or just want to reassess your financial situation, it’s important to evaluate whether you’re paying too much for FEGLI.

Here are five signs that you might be overpaying and what you can do about it.

1. Your Premiums Have Skyrocketed Over the Years

FEGLI isn’t like private life insurance, where you can lock in a rate based on your health and age at the time of purchase. Instead, FEGLI premiums increase every five years after you turn 35. If you’re in your 50s or 60s, you may have already noticed these jumps—and they only get worse as you age.

In 2025, FEGLI rates for those over 60 are significantly higher than they were just a decade ago. If you haven’t checked your payroll deductions in a while, you may be shocked at how much you’re paying now compared to when you first enrolled. Ask yourself: Is the coverage worth the rising cost, or would it make sense to explore other options?

These incremental premium increases can have a huge impact on your long-term finances. If you’re still actively employed, these rising costs may be manageable, but once you retire and switch to a fixed income, you could find yourself struggling with insurance expenses you never planned for. That’s why it’s essential to examine your premium structure before it becomes a financial burden.

2. You Have More Coverage Than You Need

Many federal employees initially opt for additional coverage through FEGLI, thinking it’s a necessary safety net. But over time, your financial situation changes. Maybe your children are now financially independent, your mortgage is paid off, or your savings have grown to a point where you don’t need as much life insurance.

If your circumstances have improved, keeping excessive coverage might not be worth the escalating costs. Take a close look at your coverage amount and assess whether you still need as much protection as you did when you first enrolled.

FEGLI offers several optional coverage tiers, including multiples of your salary. If you initially signed up for the highest level, thinking you needed the extra security, you might find that level excessive now. Many retirees and late-career employees discover that scaling back their coverage results in significant premium savings while still maintaining an adequate safety net for their loved ones.

3. You Haven’t Compared Your Options in Years

When was the last time you compared FEGLI to other life insurance options? The landscape of life insurance changes, and newer policies might provide better rates or benefits tailored to your needs.

Unlike private insurance policies, FEGLI doesn’t require a medical exam, which can be a major advantage for some employees. However, if you’re in relatively good health, you may find that other policies offer similar or better coverage for a lower cost.

Many retirees are surprised to learn that they can get a level-premium policy that stays the same price throughout their life instead of dealing with FEGLI’s ever-increasing rates.

Additionally, some private policies allow you to build cash value over time, providing you with financial flexibility. This feature is not available with FEGLI, making it essential to evaluate whether an alternative policy would better fit your needs.

4. You’re Paying for Coverage You Can’t Take With You

FEGLI coverage changes significantly after retirement. Once you leave federal service, your basic FEGLI coverage is available in different reduction options, and unless you choose the 75% reduction, you’ll continue paying premiums in retirement.

For optional FEGLI coverage, the costs become even more expensive once you’re no longer employed. Many retirees realize too late that their life insurance expenses in retirement are unsustainable. If you’re close to retirement, take the time now to evaluate whether keeping FEGLI is in your best financial interest.

Another consideration is that FEGLI does not provide the same death benefit options as private policies. Many private insurers offer riders that can enhance benefits, such as accelerated death benefits for terminal illnesses, something that may not be available through FEGLI.

5. You Haven’t Factored in Long-Term Financial Planning

Life insurance is just one part of your overall retirement planning strategy. If you’re paying too much for FEGLI, you may be sacrificing funds that could be better used elsewhere—like your Thrift Savings Plan (TSP), long-term care coverage, or other retirement investments.

Ask yourself: Could reallocating these funds improve your financial security? If FEGLI is consuming more of your budget than it should, it may be time to reconsider whether it aligns with your long-term financial goals.

Long-term financial security is about balance. Keeping some form of life insurance is important, but so is ensuring you have enough resources for healthcare, unexpected expenses, and quality of life in retirement. Evaluating your needs in a broader financial context can help you make better decisions about your insurance coverage.

What Can You Do If You’re Overpaying for FEGLI?

If you recognize any of these signs, don’t panic. You have options. Here’s what you can do:

Review Your FEGLI Coverage

Take a look at your FEGLI deductions and compare them to your actual needs. If you no longer need the full coverage, consider reducing or eliminating some of your options.

Compare Other Life Insurance Policies

If you’re still in good health, private life insurance may offer a more cost-effective solution. Compare term and whole-life policies to see if there’s a better fit for your needs.

Assess Your Retirement Plan

Consider how much life insurance you actually need in retirement. If your financial obligations have decreased, you may not need as much coverage as you once did.

Consult a Financial Professional

A licensed agent can help you analyze whether keeping or modifying your FEGLI coverage makes sense based on your overall financial situation.

Making the Right Decision for Your Future

FEGLI has its advantages, but it’s not the best solution for everyone—especially as premiums rise with age. Understanding how much you’re paying and whether it aligns with your financial goals can help you make a smarter decision. Don’t let outdated coverage drain your retirement savings. Instead, take control of your future by reassessing your insurance needs and finding a plan that works best for you.

For guidance tailored to your specific situation, reach out to a licensed agent listed on this website. They can help you explore your options and ensure you’re making the best choice for your retirement.