Created in 1954, the Federal Employees’ Group Life Insurance (FEGLI) program is the largest group life insurance program in the world, covering more than 4 million federal employees, retirees, and family members. Despite its size, it’s one of the most misunderstood benefits in the federal system.
The most important thing to know: FEGLI Basic is term life insurance. You’re paying for coverage, not building anything. There’s no cash value, no equity, and no permanent protection.
How the Basic Coverage Works
The federal government pays one-third of the Basic premium; employees pay the other two-thirds. Your Basic Insurance Amount (BIA) is calculated as your annual basic pay rounded up to the next $1,000, plus an additional $2,000.
Example: If your annual salary is $57,400, it rounds up to $58,000. Add $2,000, and your BIA is $60,000.
Because it’s term coverage, FEGLI builds no cash value. If you leave federal service before retirement, your coverage generally ends with your employment.
What Happens at Retirement or Age 65
At retirement, or age 65, whichever comes later, you choose one of three paths for your Basic coverage going forward:
75% Reduction: Coverage decreases by 2% per month until it reaches 25% of its original value. Once fully reduced, the coverage is free for life.
50% Reduction: Coverage decreases by 1% per month until it reaches 50% of its original value. A reduced premium continues for life.
No Reduction: Coverage stays at 100% of its original value, but premiums increase significantly and remain in effect for the rest of your life.
Is There a Better Option?
Private permanent life insurance works differently. It doesn’t shrink at retirement, it builds cash value over time, and it goes with you regardless of your employment status. Survivor benefits for a spouse or dependents can also be more flexible than what FEGLI provides.
If you’re within five to ten years of retirement, it’s worth a side-by-side comparison of your FEGLI options against what’s available in the private market. A Federal Retirement Consultant (FRC®) can help you assess whether what you’re currently paying is actually working in your favor.
