Key Takeaways:
- FEGLI premiums have been increasing steadily, and many federal workers are now exploring alternative life insurance options to manage costs better.
- By staying informed and proactive, federal employees can balance adequate coverage with smart financial planning, avoiding unexpected hikes in premiums.
- Also Read: Divorce and Your Federal Pension—What Happens When You Split Assets and How It Could Affect Your TSP
- Also Read: What Happens to Your Federal Benefits After Divorce? Here’s the Lowdown
- Also Read: The Best FEHB Plans for 2025: Which One Fits Your Lifestyle and Budget the Best?
What’s Going On with FEGLI Premiums?
If you’re like me, you’ve probably wondered why your life insurance costs keep rising. Well, FEGLI premiums have been increasing over the years, especially as we age. The older you get, the more you pay—particularly if you’ve opted for additional coverage under FEGLI’s “Option B.” This extra layer, which covers multiples of your salary, might seem like a good idea when you’re younger. But for those of us in our 40s, 50s, or nearing retirement, those premiums can hit harder than expected.
In 2024, the hike in premiums is becoming more noticeable. While standard coverage (your Basic insurance) is still somewhat affordable, the optional coverage (Options A, B, and C) starts to feel like a financial drain, especially if you’re holding onto more than a few multiples of your salary. And let’s not forget—the longer you hold onto it, the more it costs. It’s easy to see why some federal employees are rethinking their life insurance strategies.
The Age Factor—Why FEGLI Costs Rise as You Get Older
Here’s the deal: life insurance is all about risk. The older you are, the higher the perceived risk for the insurance company. FEGLI’s structure reflects this, meaning premiums for your optional coverage increase every five years. If you’ve recently crossed into a new age bracket (think 50, 55, or 60), you’ve probably already seen the impact on your paycheck.
For example, if you’re 55 in 2024, your Option B coverage is significantly more expensive than it was when you were 50. It’s designed that way because as we age, the likelihood of a payout increases. The unfortunate part is that for many of us, this price increase hits just as we’re nearing retirement—when we’re most concerned about keeping costs down.
Strategies to Stay Ahead of the Curve
So, what can you do about it? Luckily, there are several ways to manage rising FEGLI premiums without sacrificing the coverage you need. Here are a few strategies to consider:
1. Reevaluate Your Coverage Needs
Ask yourself: Do I still need the same amount of life insurance I did 10 or 20 years ago? As we get older, our financial situations change. If your kids are grown, your mortgage is paid off, or you’ve built up a solid retirement fund, you might not need as much coverage as before. By reducing the multiples of your salary that you’re insuring under Option B, you can cut down those premiums significantly.
2. Consider Dropping Option B After Retirement
Once you retire, you may not need as much life insurance, especially if you have other assets or savings in place. Many retirees consider dropping Option B altogether, sticking only with the Basic coverage (which continues into retirement at a reduced cost). This move can save you a lot of money, especially as you enter those higher age brackets.
3. Explore Private Life Insurance Alternatives
Although we won’t dive into specific private plans or prices, it’s worth mentioning that shopping around for private life insurance could offer better rates, especially if you’re relatively healthy. Some federal employees find that by switching to a private plan in their 40s or 50s, they can lock in lower premiums for the long term, avoiding the steep increases FEGLI imposes every five years.
4. Take Advantage of Open Season
Federal workers have the opportunity to adjust their life insurance coverage during the annual FEGLI Open Season. While Open Season for FEGLI doesn’t happen every year, it’s your chance to reassess your needs, adjust your coverage levels, or even opt into new policies. Staying proactive during these windows is key to ensuring you’re not overpaying for coverage you no longer need.
Balancing Coverage and Costs
It’s a delicate balance—having enough life insurance to protect your loved ones without letting premiums eat into your budget. In 2024, federal employees are increasingly weighing the pros and cons of FEGLI versus other life insurance options. For some, sticking with Basic FEGLI is a no-brainer, especially since it’s partially subsidized by the government. But for others, paying for additional coverage under Option B, which gets more expensive every five years, might not make as much sense as it once did.
If you’re unsure about what’s right for you, it could be worth sitting down with a financial planner to review your situation. They can help you figure out how much coverage you actually need, and whether FEGLI is still the best fit, given the premium increases.
Why You Shouldn’t Wait to Make Changes
Waiting too long to adjust your life insurance can cost you—literally. Every year you hold onto that extra coverage under Option B, the more you’ll pay. And if you’re like many federal workers, you may not have even realized how much those premiums have increased. It’s one of those things that can sneak up on you.
In 2024, the landscape of federal benefits is shifting. Rising healthcare costs, inflation, and increased insurance premiums are making it more important than ever to take control of your financial situation. Life insurance is a key piece of that puzzle, but it’s also one that needs regular review. Don’t get caught off guard by another premium hike when you could be reallocating that money to other parts of your retirement plan.
Take Action Before It’s Too Late
The takeaway here is simple: don’t wait until your FEGLI premiums become unsustainable. Review your coverage regularly, especially as you approach major life milestones like retirement. There are ways to reduce your costs while still maintaining the protection your family needs—whether that’s sticking with Basic FEGLI, adjusting your Option B multiples, or exploring alternatives. Stay informed, and you’ll stay ahead of the curve, no matter what 2024 brings.
