How FEGLI Premium Changes Are Forcing Federal Employees to Reevaluate Their Plans

Jeff Boettcher
July 9, 2025

Key Takeaways

Rising FEGLI premiums can drastically impact your budget—especially as you near retirement. Regularly reviewing your options is critical to staying financially secure.
Understanding your FEGLI choices empowers you to make smarter decisions about whether to keep, reduce, or replace your coverage based on your needs and financial goals.

What is FEGLI, and Why Does It Matter to You?

The Federal Employees’ Group Life Insurance (FEGLI) program is the largest group life insurance plan in the world, providing term life insurance coverage to millions of federal employees and retirees. It offers basic life insurance coverage, along with optional coverage for employees who want additional protection.

You might already know that FEGLI can serve as an essential safety net for your loved ones. But what happens when premiums increase? It’s no secret that the rising costs of FEGLI coverage have forced many federal employees and retirees to reassess their options. If you’re facing this challenge, you’re not alone—and understanding your options can help you make informed decisions.

Breaking Down FEGLI Premium Changes

What’s Behind the Premium Increases?

FEGLI premiums rise primarily due to age. The program is structured so that as you grow older, you pay more—especially for optional coverage like Option B or Option C. Federal employees and retirees in their 50s, 60s, and beyond often see the most significant premium hikes.

Starting at age 45, premiums typically increase every five years. These age brackets can lead to substantial cost jumps that might catch you off guard if you’re not paying attention.

Additionally, changes in actuarial assumptions, administrative costs, and inflation also contribute to rising premiums. While these factors are beyond your control, they directly impact your paycheck or annuity.

The Financial Toll of Increasing Premiums

Budget Busters: How Premiums Impact Your Take-Home Pay

Whether you’re still working or retired, escalating premiums can eat into your monthly income. For active employees, higher deductions reduce your take-home pay. For retirees, those costs may cut into your annuity payments, leaving you with less disposable income to cover other essentials.

Optional Coverage: A Costly Add-On?

Options B and C, which provide coverage for multiples of your salary or family members, respectively, can become prohibitively expensive as you age. For example, many employees in their 50s and 60s face difficult decisions about whether these extra layers of protection are still worth the price.

Should You Keep, Reduce, or Cancel Your FEGLI Coverage?

Assessing Your Needs

The first step in making any decision about your FEGLI coverage is understanding your current financial situation and life insurance needs. Ask yourself:

Do I have dependents? If so, how much financial protection do they need?
Do I have significant debts, like a mortgage?
Have I accumulated enough savings to cover final expenses?

If you’re nearing retirement or have fewer financial obligations, you might not need as much life insurance as you did earlier in your career.

Reducing or Dropping Optional Coverage

If rising premiums are straining your finances, consider reducing or dropping your optional FEGLI coverage while keeping the Basic coverage, which is often more affordable. Basic FEGLI coverage includes accidental death benefits and remains relatively stable compared to optional coverage.

Alternatives to FEGLI: What Are Your Options?

Private Life Insurance Policies

One alternative is to look into private life insurance plans, which might offer more competitive rates for comparable coverage. While these policies can provide long-term cost savings, remember that premiums are influenced by your age and health at the time of application.

Self-Insurance: A Viable Strategy?

If you’ve accumulated enough savings and investments to cover your final expenses and provide for your family, you might choose to “self-insure.” This means relying on your financial assets rather than a life insurance policy to meet your family’s needs.

Planning for Retirement: How FEGLI Fits In

Should Retirees Keep FEGLI?

For retirees, FEGLI premiums can be particularly challenging. If you’re living on a fixed income, you’ll need to weigh the cost of coverage against its benefits. Many retirees opt to reduce their coverage or let it phase out entirely to save on premiums.

Combining FEGLI with Other Benefits

If you’re nearing age 65, you may also be integrating Medicare and FEHB into your retirement healthcare strategy. This is a great time to reexamine your overall financial picture, including life insurance needs.

Steps to Take Right Now

Review Your FEGLI Policy

Log into your federal benefits portal or speak with your HR department to review your FEGLI policy. Take note of your current coverage levels and the associated costs.

Perform a Life Insurance Audit

Look at your overall insurance needs and assess whether FEGLI still makes sense for you. Evaluate your current expenses, dependents’ needs, and other financial obligations.

Compare Your Options

Shop around to see if alternative coverage might better suit your needs. Consider speaking with a financial advisor who can help you crunch the numbers.

Understanding the Timeline for FEGLI Adjustments

When to Act

The best time to make changes to your FEGLI policy is during your annual benefits open season or when you experience a qualifying life event, such as marriage, divorce, or the birth of a child. These events allow you to adjust your coverage without needing a physical exam.

Long-Term Planning

FEGLI is a valuable benefit, but it’s not a one-size-fits-all solution. Regularly revisiting your coverage ensures that it continues to meet your needs, especially as your life circumstances evolve.

What It Means for You

Rising FEGLI premiums may feel like a financial burden, but they’re also an opportunity to reassess your life insurance strategy. By understanding your options, you can take control of your finances and make decisions that align with your goals. Whether you choose to keep, reduce, or replace your FEGLI coverage, staying informed ensures you’re making the best choice for you and your family.

Taking Control of Your Life Insurance Plan

Rising FEGLI premiums are unavoidable, but they don’t have to derail your financial plans. With a little research and proactive decision-making, you can ensure your life insurance coverage meets your needs—without breaking the bank.

Jeff Boettcher

For over 20 years, Jeff Boettcher has helped his clients grow and protect their retirement savings. "each time I work with my clients, I'm building their future, and there are few things that are more important to a family than a stable financial foundation."

Jeff is known for his ability to make the complex simple while helping navigate his clients through the challenges of making the right investment decisions. When asked what he is most passionate about professionally, his answer was true to character, "Helping my clients – I love being able to solve their problems. People are rightfully concerned about their retirement income, when they can retire, how to maximize their financial safety and future income." Jeff started Bedrock Investment Advisors for clients who value a close working relationship with their advisors.

A Michigan native, Jeff grew up playing sports throughout high school and into college. While Jeff is still an 'aging' athlete, Jeff will take more swings on the golf course than miles running these days. He creates family time, often with weekly excursions to play golf, a hobby he shares with his three young children.

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.