Why Federal Employees Are Exploring Alternatives to FEGLI as Premium Costs Continue to Rise in 2025

todd carmack
October 8, 2025

Key Takeaways

FEGLI premiums in 2025 have risen significantly, leading many federal employees to reassess its value compared to alternative options.
Understanding your financial goals and exploring private insurance or other benefits can help you make an informed decision about your life insurance needs.

Rising Costs in FEGLI: What You Need to Know

As a federal employee, you’ve likely relied on the Federal Employees’ Group Life Insurance (FEGLI) program for your life insurance needs. However, in 2025, many are finding that the increasing premiums are taking a bigger bite out of their budgets, especially as they approach retirement. This shift has sparked a growing trend: exploring alternatives to FEGLI that provide better value and align more closely with individual financial goals.

FEGLI’s premiums are structured to increase with age, which can make them unsustainable for those looking to maintain robust coverage throughout their retirement years. These cost increases are prompting employees to take a closer look at whether the benefits still justify the expense.

Why Are FEGLI Premiums Increasing?

Premium increases for FEGLI are tied to multiple factors, including the program’s cost structure and the rising expenses associated with providing life insurance for an aging workforce. FEGLI rates, particularly for Option B (additional coverage) and Option C (family coverage), can climb steeply as you age, with employees over 60 experiencing the most significant hikes.

In 2025, these rising premiums reflect broader economic trends, such as inflation and increased administrative costs. While FEGLI’s basic coverage remains affordable for many, the additional options can quickly become prohibitively expensive.

Assessing Your Current Coverage

Before making any decisions, it’s essential to take stock of your current FEGLI coverage and understand what you’re paying for. Here’s how to evaluate your situation:

Understand the Basics: FEGLI’s Basic Insurance covers your annual salary (rounded up to the next $1,000) plus $2,000. Additional options allow you to increase coverage for yourself and your family.
Review Your Costs: Check your most recent Leave and Earnings Statement to see how much you’re paying for FEGLI. Compare these costs to the benefits you’re receiving.
Determine Your Needs: Ask yourself whether the coverage provided aligns with your current financial situation and long-term goals.

Exploring Alternatives to FEGLI

With the rise in FEGLI premiums, many federal employees are exploring other options. Here are some of the most common alternatives:

1. Private Life Insurance Policies

Private insurance companies often offer policies that can be tailored to your specific needs. Term and whole life insurance policies are two popular options:

Term Life Insurance: Provides coverage for a specific period, often at a lower cost than FEGLI. This is ideal for those who need coverage during their working years or until certain financial obligations are met.
Whole Life Insurance: Offers lifelong coverage and includes a cash value component, which can serve as a financial asset. While more expensive than term life, it may offer better value over time compared to FEGLI’s escalating premiums.

2. Survivor Benefits

Federal employees under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS) can opt for survivor benefits, which provide a steady income to a designated beneficiary. While not a direct replacement for life insurance, this can complement your overall financial strategy.

3. Thrift Savings Plan (TSP)

If you’re looking to ensure financial security for your loved ones, your TSP can serve as an additional resource. By maximizing contributions and choosing appropriate investment options, you can build a nest egg that complements other forms of coverage.

The Role of Financial Planning

Switching from FEGLI to an alternative requires careful financial planning. Here’s how to get started:

Step 1: Assess Your Financial Goals

Think about what you want to achieve with your life insurance policy. Do you need coverage to pay off a mortgage, fund your children’s education, or provide income replacement for your family?

Step 2: Compare Costs and Benefits

Use online calculators or consult with a financial advisor to compare the costs of FEGLI with private insurance options. Be sure to account for:

Monthly premiums
Coverage amounts
Potential cash value (for whole life policies)
Additional benefits or riders

Step 3: Understand Policy Terms

If you’re considering private insurance, make sure you understand the terms of the policy. For example, does the policy include a guaranteed renewal? Are there exclusions or waiting periods?

Step 4: Consult with Experts

A financial advisor or insurance broker can help you navigate the complexities of life insurance. They can provide personalized advice based on your age, health, and financial situation.

Maximizing Your Benefits in Retirement

If you’re approaching retirement, life insurance needs often shift. Many retirees no longer require as much coverage as they did during their working years. Here’s how to adjust your strategy:

1. Reduce Unnecessary Coverage

If your children are grown and your mortgage is paid off, you may not need as much life insurance. Consider scaling back your coverage to match your reduced financial obligations.

2. Leverage Other Benefits

Retirees often have access to benefits like Social Security, pensions, and the TSP. Use these resources to provide financial security for your loved ones, reducing your reliance on life insurance.

3. Explore Permanent Insurance Options

If you want lifelong coverage, consider a private whole life policy. While the premiums are higher, the fixed costs and additional benefits may make it a better option than FEGLI for some retirees.

Balancing Costs and Coverage

Finding the right balance between costs and coverage is key to making an informed decision about life insurance. Here are some tips:

Shop Around: Even within private insurance, rates and terms can vary widely. Get quotes from multiple providers to find the best fit for your needs.
Bundle Policies: Some insurance providers offer discounts if you bundle life insurance with other types of coverage, such as auto or homeowners insurance.
Consider Your Health: Your age and health status can significantly impact the cost of private insurance. If you’re in good health, you may qualify for lower premiums.

Key Considerations for 2025

When evaluating your options, keep these 2025-specific factors in mind:

Premium Trends: FEGLI’s premiums are likely to continue increasing. Plan for these rising costs if you decide to stick with the program.
Policy Availability: Some private insurers offer policies specifically designed for federal employees. These may provide additional benefits tailored to your unique needs.
Legislative Changes: Stay informed about any legislative changes that could impact your benefits or the availability of life insurance options.

Final Thoughts: Reassessing Your Life Insurance Needs

The rising costs of FEGLI in 2025 are prompting many federal employees to reevaluate their life insurance options. By understanding your needs, exploring alternatives, and leveraging financial planning tools, you can find a solution that provides the right coverage at a price that fits your budget. Whether you stick with FEGLI, transition to a private policy, or rely on other benefits, the most important step is taking control of your financial future.

Todd Carmack

Todd Carmack grew up in Dubuque, Iowa, where he learned the concepts of hard work and the value of a dollar. Todd spent years in Boy Scouts and achieved the honor of Eagle Scout. Todd graduated from Iowa State University, moved to Chicago, spent a few years managing restaurants, and started working in financial services and insurance, helping families prepare for the high cost of college for their children. After spending years in the insurance industry, Todd moved to Arizona and started working with Federal Employees, offing education and options on their benefits. Becoming a Financial Advisor / Fiduciary can help people properly plan for the future. Todd also enjoys cooking and traveling in his free time.

Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.