Federal employees may take their Federal Employees' Group
Life Insurance (FEGLI) benefits into retirement if they've been in the program
for at least five years, as most have been. But it can pay off to think about
FEGLI in retirement well before that date arrives. Your FEGLI insurance
coverage may be adequate for your needs now.
However, remember that FEGLI offers only term insurance and
term insurance rates are extremely competitive, especially for multi-year
contracts. You might be able to find term insurance on the open market at a
better price per dollar of coverage, as well as insurance for larger amounts
than the maximum allowed for you under FEGLI. You might get better rates on the
open market if you qualify as a preferred rather than a standard risk. Factors
that determine this include smoking, driving records, blood pressure, history
of illness, weight problems, cholesterol level and others. Of course, if you
want life insurance with an investment account, you'll have to look beyond
FEGLI.
The FEGLI program does not provide coverage that builds cash
value. If your children have completed their education and have become
independent, your life insurance may be in place solely for the benefit of your
surviving spouse—both for your spouse's ongoing expenses and to provide funds
to settle your estate, including paying any estate taxes due.
In addition to your life insurance proceeds, your surviving
spouse may get a civil service survivor annuity and/or Social Security benefits
plus any other earned annuity. Would that, combined with your savings, be
enough? That depends on how high your estate taxes will be and the lifestyle
you desire for your surviving spouse. If you believe you should have more
insurance, several factors come into play. First of all, remember that you
can't add to your FEGLI coverage after retirement. However, you can add to it
before retirement, most commonly (unless there happens to be one of the rare
FEGLI open seasons or you experience a life event such as marriage) through
going through an application process that requires medical underwriting. If you
find after retirement that you need more coverage, you will have to buy it
through the private sector.
Insurability can become a key issue. This is not a factor
with FEGLI insurance but it is with privately purchased insurance. Your health
will determine if you'll be able to get coverage at all and if so, how much
you'll have to pay. In many cases, it may be that you would have been better
off adding FEGLI coverage before retirement—but by then it will be too late.
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