Federal Employees Group Life Insurance (FEGLI): Benefits, Coverage, and Retirement Options
The Federal Employees Group Life Insurance (FEGLI) program provides life insurance coverage to federal employees, retirees, and their dependents. Established in 1954, FEGLI is the largest group life insurance program in the world and offers federal employees an affordable way to protect their families financially in the event of their death. With multiple coverage options, flexible enrollment, and survivor benefits, FEGLI plays a vital role in federal employee benefits packages.
This guide covers FEGLI benefits, coverage options, premiums, and the retirement benefits available under this program. Whether you’re an active federal employee or nearing retirement, understanding how FEGLI works will help you make informed decisions about your life insurance needs.
What is FEGLI?
The Federal Employees Group Life Insurance (FEGLI) program provides term life insurance coverage to federal employees and retirees. It’s a group life insurance policy, meaning the coverage is offered to a large pool of federal employees, which helps keep premiums relatively low compared to private life insurance policies. However, unlike private insurance, FEGLI does not build cash value over time.
Key Features of FEGLI:
- Basic Coverage: All federal employees are automatically enrolled in Basic FEGLI coverage unless they opt out. This coverage includes life insurance equal to the employee’s annual salary, rounded up to the nearest thousand, plus an additional $2,000.
- Optional Coverage: Federal employees can choose additional life insurance through Option A, Option B, and Option C coverage, which provides increased protection for themselves and their dependents.
- Low Premiums: FEGLI premiums are competitive, making it an affordable option for many federal employees compared to private life insurance.
Understanding FEGLI coverage helps federal employees protect their families in the event of a tragedy.
FEGLI Benefits: Basic vs. Optional Coverage
FEGLI offers several levels of life insurance coverage, ranging from Basic coverage to Optional coverage, allowing federal employees to tailor their coverage to meet their specific needs.
FEGLI Basic Coverage:
- Automatic Enrollment: All eligible federal employees are automatically enrolled in Basic FEGLI coverage unless they decline it.
- Coverage Amount: Basic coverage equals the employee’s annual salary, rounded up to the nearest $1,000, plus $2,000. For example, if your annual salary is $55,200, your basic coverage would be $57,000.
- Government Contribution: The federal government pays approximately one-third of the premium for Basic coverage, making it an affordable option for employees.
FEGLI Optional Coverage:
- Option A – Standard Optional: Provides an additional $10,000 in life insurance coverage. Employees can choose Option A if they want a small increase in coverage beyond Basic.
- Option B – Additional Optional: Employees can elect up to five times their annual salary in additional life insurance coverage. This option is useful for individuals who want to ensure their family is well provided for.
- Option C – Family Optional: Covers the lives of the employee’s spouse and eligible dependent children. Coverage amounts are up to $25,000 for a spouse and $12,500 for each child.
Choosing the right FEGLI coverage options ensures that federal employees have the appropriate level of life insurance for their family’s needs.
FEGLI Premiums: What You Pay
The cost of FEGLI premiums is an important consideration for federal employees and retirees. Unlike private life insurance policies, FEGLI premiums are based on the employee’s age and salary, and the federal government helps subsidize part of the premium for Basic coverage.
Basic Coverage Premiums:
- Affordable Coverage: For most employees, the federal government pays approximately one-third of the premium for Basic coverage, and employees pay the rest through payroll deductions.
- Age-Based Premiums: The cost of Optional FEGLI coverage increases with age. As employees get older, the premiums for Optional coverage will rise, making it more expensive over time.
Optional Coverage Premiums:
- Option A Premiums: The cost of Option A coverage is relatively low but increases every five years as employees age.
- Option B Premiums: Premiums for Option B are based on your salary and increase every five years. Since employees can select coverage worth up to five times their salary, this option can become quite expensive as they approach retirement.
- Option C Premiums: The cost of Option C (family coverage) is based on the employee’s age and covers the employee’s spouse and eligible children. Premiums increase as the employee ages.
By understanding the cost structure of FEGLI premiums, federal employees can plan their life insurance coverage to fit their budget.
How FEGLI Works: Enrollment and Open Season
Enrollment in FEGLI typically happens when an employee first begins federal service, but changes to coverage can be made during certain periods, such as FEGLI open season or when a qualifying life event occurs.
How to Enroll in FEGLI:
- Automatic Enrollment: Federal employees are automatically enrolled in Basic FEGLI coverage unless they opt out during their initial enrollment period.
- FEGLI Open Season: Open seasons for FEGLI are rare, but during an open season, employees can enroll in Optional coverage or increase their existing coverage without undergoing a medical exam.
- Qualifying Life Events: Certain life events, such as marriage, divorce, or the birth of a child, allow employees to change their FEGLI coverage outside of the open season.
Understanding how FEGLI enrollment works ensures that federal employees and retirees can adjust their life insurance coverage when needed.
FEGLI Retirement Benefits: Continuing Coverage After You Retire
For federal employees nearing retirement, one of the biggest decisions they’ll face is whether to keep their FEGLI coverage after they retire. FEGLI retirement benefits allow employees to maintain life insurance coverage into retirement, but there are specific rules and options for doing so.
Continuing FEGLI into Retirement:
- Basic Coverage: Federal retirees can continue their Basic FEGLI coverage into retirement if they meet certain eligibility requirements. Retirees who continue Basic coverage can choose to reduce their coverage by 75%, 50%, or keep the full amount into retirement.
- Optional Coverage: Retirees can continue Optional coverage into retirement, but they will be responsible for paying the full cost of the premiums, which increase as they age. The cost of Option B coverage can become particularly expensive in retirement.
- Eligibility for Continuing FEGLI: To continue FEGLI into retirement, employees must have been enrolled in FEGLI for at least five years before their retirement date or since their first opportunity to enroll.
By reviewing FEGLI retirement options, federal employees can decide how much life insurance coverage they want to carry into retirement and plan accordingly.
FEGLI vs. Private Life Insurance: Which is Better?
Many federal employees wonder whether to rely on FEGLI or purchase private life insurance to protect their families. Both have their advantages and disadvantages, and the right choice depends on your personal financial goals, health, and family situation.
Advantages of FEGLI:
- Affordable Basic Coverage: For most federal employees, FEGLI Basic coverage is highly affordable, and the federal government subsidizes a portion of the premiums.
- No Medical Exam Required: When federal employees enroll in FEGLI, there is no medical exam or health screening required, which is a benefit for individuals who may have pre-existing health conditions.
- Convenient Payroll Deduction: FEGLI premiums are automatically deducted from your paycheck, making it a convenient option for many employees.
Advantages of Private Life Insurance:
- More Flexible Options: Private life insurance policies, including term life and whole life options, can provide more flexibility in terms of coverage amounts and policy types.
- Cash Value Accumulation: Many private life insurance policies, such as whole life insurance, accumulate cash value over time, which can be borrowed against or used for other purposes.
- Lower Premiums for Younger, Healthier Individuals: While FEGLI Optional coverage becomes more expensive as you age, younger and healthier individuals may find that private term life insurance offers lower premiums over time.
By comparing FEGLI vs. private life insurance, federal employees can choose the coverage that best meets their needs and budget.
How to Calculate FEGLI Benefits: Using the FEGLI Calculator
Estimating your life insurance coverage through FEGLI is important for understanding how much financial protection your family will receive in the event of your death. The FEGLI calculator is an online tool that allows federal employees to calculate their life insurance coverage and premiums.
How to Use the FEGLI Calculator:
- Input Salary Information: The FEGLI calculator requires you to input your annual salary to calculate your Basic coverage and Optional coverage amounts.
- Choose Coverage Options: The calculator will prompt you to select how many multiples of salary you want for Option B and whether you want to add family coverage through Option C.
- View Premiums: After entering your information, the calculator will display your total FEGLI premiums based on your chosen coverage and age.
Using the FEGLI calculator helps federal employees make informed decisions about their life insurance coverage.
FEGLI Survivor Benefits: Financial Protection for Loved Ones
One of the primary purposes of life insurance is to provide financial security for your loved ones in the event of your death. FEGLI survivor benefits offer your designated beneficiaries a tax-free death benefit that can be used to cover funeral expenses, pay off debts, or provide ongoing financial support.
Key Aspects of FEGLI Survivor Benefits:
- Tax-Free Payout: The death benefit paid out under FEGLI is generally tax-free, meaning your beneficiaries receive the full amount of coverage.
- Beneficiary Designation: It’s important to keep your beneficiary information up to date with OPM to ensure that your loved ones receive the FEGLI survivor benefits.
- Payment Options: Beneficiaries can choose to receive the FEGLI death benefit as a lump-sum payment or in a series of payments, depending on their financial needs.
By keeping your FEGLI survivor benefits up to date, you can ensure that your family is financially protected in the event of your death.
Choosing the Right FEGLI Coverage for You
FEGLI offers valuable life insurance coverage for federal employees and retirees, with options to suit a variety of needs and budgets. By understanding the FEGLI benefits, coverage options, and premium structure, federal employees can make informed decisions about how much life insurance they need to protect their families.
If you’re unsure about your FEGLI options, consider using the FEGLI calculator or speaking with a financial advisor to determine the best coverage for your specific situation.
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