Most Federal Employees Overpay for Life Insurance—Here’s a Smarter Approach

Missy E
November 14, 2025

Key Takeaways

Many federal employees pay more than necessary for life insurance through the Federal Employees’ Group Life Insurance (FEGLI) program, especially as they age and premiums rise.
Understanding how FEGLI works and exploring alternative options can help you save significantly on premiums while maintaining adequate coverage.

Understanding the Basics of FEGLI

The Federal Employees’ Group Life Insurance (FEGLI) program has been a staple of employee benefits

for decades. Established in 1954, it provides group term life insurance coverage to federal employees and retirees. While it’s convenient and easy to enroll in, it’s also where many government employees end up overpaying for coverage. FEGLI remains the largest group life insurance program in the world, covering millions of federal workers and retirees. However, convenience doesn’t always mean cost-effectiveness.

How FEGLI Works

FEGLI is structured as group term life insurance with no cash value. The program offers several coverage options:

Basic Insurance: Equal to your annual salary rounded up to the next $1,000, plus an additional $2,000. The federal government covers one-third of the premium while you pay the rest. This option remains the most affordable but provides limited coverage.
Option A (Standard): Provides $10,000 of additional coverage. While useful for some, it often falls short for those with substantial financial obligations.
Option B (Additional): Allows you to select coverage equal to one, two, three, four, or five times your annual salary. This is where premiums escalate dramatically as you age.
Option C (Family): Covers your spouse and eligible children. Though relatively inexpensive for younger employees, the costs increase significantly over time.

FEGLI premiums are deducted from your paycheck, and while the basic coverage is affordable for most employees, the costs for additional coverage can escalate quickly. In many cases, these premiums can become unaffordable or unnecessary, particularly once you retire or reach certain age thresholds.

Why Many Federal Employees Overpay

Overpayment for life insurance through FEGLI often occurs due to three primary reasons:

Age-Based Premium Increases: FEGLI premiums rise sharply as you age, particularly for Options B and C. Once you reach age 50, costs increase significantly with each five-year age band. For example, someone aged 60-64 pays several times more than someone in their 40s for the same amount of coverage. After age 65, the premiums can become unsustainable for many retirees living on fixed incomes.
Misalignment of Coverage Needs: Many employees continue to carry high levels of coverage through Option B even when their financial obligations decrease, such as after paying off a mortgage or when children become financially independent. Continuing to pay for unnecessary coverage is a common and costly mistake.
Lack of Awareness of Alternatives: Federal employees often assume that FEGLI offers the best rates because it’s a government program. In reality, many private insurers provide more affordable term life insurance options, especially for those in good health. Lack of comparison shopping can result in overpaying by thousands of dollars over the course of your career.

Comparing FEGLI Costs by Age

Understanding how FEGLI premiums increase over time is essential to making an informed decision. As of 2025, FEGLI premiums for Option B (Additional Insurance) rise as follows:

Ages 35-39: Relatively affordable, but higher than many private alternatives.
Ages 40-44: Significant increase compared to the previous age band.
Ages 45-49: Noticeable hike, but still manageable for most employees.
Ages 50-54: Costs start to increase rapidly. This is often a tipping point where exploring alternatives becomes financially wise.
Ages 55-59: Premiums double compared to the previous band, making this an ideal time to reassess your coverage.
Ages 60-64: Dramatic rise, making FEGLI coverage far less cost-effective. Many retirees begin to feel the strain of these higher premiums.
Ages 65+: Premiums continue to escalate, often making it unaffordable for retirees living on fixed incomes.

Evaluating Your Actual Insurance Needs

Before making changes to your life insurance strategy, it’s essential to assess your current needs. Consider the following:

Financial Dependents: Do you have children or a spouse relying on your income? Are their financial needs long-term or short-term?
Outstanding Debts: Mortgages, car loans, or other debts that would need to be paid off if you were to pass away. These debts can significantly impact the type and amount of coverage you need.
Retirement Savings: If you have a substantial TSP balance or other savings, you may not need as much life insurance. Consider how your retirement funds align with your insurance needs.
Healthcare Costs: Consider potential long-term care or medical expenses. These expenses can be substantial, especially if you are in your 60s or older.

Exploring Smarter Alternatives

If you find yourself paying exorbitant premiums through FEGLI, there are several steps you can take to reduce costs:

Comparison Shopping: Research private insurance policies to compare premiums. Often, you can find better rates with individual term policies, especially if you are in good health. Term policies can provide more substantial coverage at a fraction of the cost you’d pay through FEGLI.
Reducing FEGLI Coverage: Many employees benefit from reducing or eliminating Options B and C as their financial responsibilities decrease. Keeping only the basic coverage can save you hundreds or even thousands annually.
Exploring Retirement Options: As a retiree, your need for life insurance may change. Consider how your retirement income sources, such as FERS, TSP, and Social Security, impact your insurance needs. Analyzing these factors can save you from paying for unnecessary coverage.

The Need for Regular Review

Deciding whether to keep or reduce your FEGLI coverage depends on your individual circumstances. Factors to consider include:

Your age and how FEGLI premiums are affecting your budget.
Whether your financial dependents still rely on your income.
If you’ve accumulated sufficient savings to cover future expenses.
Whether you are still employed or have retired, as your insurance needs may change.

Ultimately, making an informed decision about your life insurance coverage requires periodically reassessing your needs and comparing available options.

Finding Professional Guidance

Navigating your life insurance options can be complicated. Speaking with a licensed agent can help you identify coverage that matches your current needs and budget. Visit this website to get in touch with a licensed agent for professional advice.