Most employees are eligible for FEGLI coverage. FEGLI provides group term life insurance. As such, it does not build up any cash value or paid-up value. It consists of Basic life insurance coverage and three options.
In most cases, if you are a new Federal employee, you are automatically covered by Basic life insurance and your payroll office deducts premiums from your paycheck unless you waive the coverage. In addition to the Basic, there are three forms of Optional insurance you can elect. You must have Basic insurance in order to elect any of the options. Unlike Basic, enrollment in Optional insurance is not automatic — you must take action to elect the options.
The cost of Basic insurance is shared between you and the Government. You pay 2/3 of the total cost and the Government pays 1/3. Your age does not affect the cost of Basic insurance. You pay the full cost of Optional insurance, and the cost depends on your age. The U.S. Postal Service pays the entire cost of USPS employees’ Basic life insurance. USPS employees must pay 100% of the cost of Optional insurance.
The Office of Federal Employees’ Group Life Insurance (“OFEGLI”), which is a private entity that has a contract with the Federal Government, processes and pays claims under the FEGLI Program.
Overall, FEGLI is rather inexpensive when you are younger (and less likely to need it). However, as you age, FEGLI will become very expensive. At that time, it’s best to use the conversion privilege option. Under the conversion privilege, you may convert all or any part of your Basic and Optional insurance to an individual policy and no medical examination is required. The cost of converting your FEGLI life insurance will depend on how healthy you are, your age, and a host of other factors. Regardless your FEGLI rates will increase every five years, and FEGLI cannot accumulate a cash value. Converting your FEGLI allows you to lock in your price for 10, 20 sometimes for as many as 30 years, and some also accumulate a cash value you can use in retirement.