FEGLI Premiums Keep Rising—Here’s How to Decide If You Should Keep or Cancel Your Policy

Key Takeaways

1. FEGLI premiums often rise as you age, significantly impacting your retirement income. It’s crucial to weigh the costs and benefits of keeping your policy.

2. Understanding your options and alternative coverage can help you make a confident decision about whether to keep or cancel your FEGLI policy.

The Rising Cost of FEGLI: What You Need to Know

Federal Employees’ Group Life Insurance (FEGLI) is a vital part of many federal workers’ benefits packages, but it’s no secret that the premiums can become a financial burden over time. By design, FEGLI premiums increase significantly as you age, particularly for retirees who choose to continue their coverage after leaving the workforce. In 2025, it’s more important than ever to evaluate whether this benefit still serves your financial needs.

Why Do FEGLI Premiums Keep Increasing?

FEGLI premiums are calculated based on your age, the coverage amount, and the type of coverage you select. Here’s why costs keep climbing:

• Age Brackets: FEGLI rates increase every five years starting at age 35. For retirees, the jump in premiums becomes particularly steep after age 50, and again after age 65.

• Coverage Type: Options like Option B (additional coverage) and Option C (family coverage) can significantly drive up costs. These optional coverages tend to see higher rate increases as you age.

• No Adjustments for Risk: Unlike private life insurance policies, FEGLI does not assess individual health risks. Everyone in the same age bracket pays the same rate, whether they are in excellent health or have significant medical conditions.

Understanding Your FEGLI Options

As you consider whether to keep or cancel your FEGLI policy, it’s important to understand the coverage choices available:

• Basic Coverage: This is the default and includes a death benefit equal to your annual salary, rounded up to the nearest $1,000, plus $2,000. The government subsidizes part of the cost while you are employed.

• Option A: Provides an additional $10,000 in coverage.

• Option B: Allows you to select coverage equal to 1-5 times your salary.

• Option C: Covers eligible family members, such as your spouse and dependent children.

Deciding Whether to Keep FEGLI in Retirement

The decision to maintain FEGLI coverage after retirement isn’t always straightforward. Here are the main factors to consider:

1. Cost vs. Benefit

Premiums increase sharply as you age, and the value of the coverage may not justify the expense. Calculate how much you’ll spend in premiums over time compared to the benefit your beneficiaries will receive. If the math doesn’t work out, it may be time to reconsider.

2. Financial Needs of Your Family

Do your beneficiaries still need the protection FEGLI provides? If your mortgage is paid off, your children are financially independent, and your spouse has sufficient savings, you may not need as much coverage.

3. Alternative Insurance Options

Other life insurance policies might offer lower premiums or better terms, particularly if you’re in good health. While private policies typically require a health exam, they can be more cost-effective in the long run for some retirees.

4. Retirement Income and Budget

Assess how FEGLI premiums fit into your overall retirement budget. If premiums are eating into funds allocated for daily living expenses or other financial goals, it might be time to reassess.

FEGLI Reduction Options for Retirees

If you decide to keep FEGLI coverage in retirement, you can manage costs by reducing your coverage. When you retire, you’ll have the option to:

• Continue Basic Coverage with Reductions: You can elect a 75% reduction in your Basic coverage at no cost after age 65.

• Reduce or Drop Optional Coverages: Options A, B, and C can be reduced or dropped entirely to save on premiums.

How to Cancel FEGLI Coverage

Canceling your FEGLI policy is straightforward but irreversible. To cancel, you’ll need to:

1. Complete Form SF 2817.

2. Submit the form to your human resources or payroll office (if you’re still employed) or to the Office of Personnel Management (OPM) if you’re retired.

Keep in mind that once canceled, you can’t re-enroll in FEGLI unless you return to federal service in a benefits-eligible position.

Alternatives to FEGLI

If FEGLI premiums are too high, consider these alternatives:

1. Private Life Insurance

Private insurance policies often provide lower rates for individuals in good health. You can customize coverage amounts and durations to fit your specific needs.

2. Self-Insurance

If you’ve saved enough to cover your final expenses and leave a financial legacy, you may not need a life insurance policy. This approach is known as self-insurance.

3. Term Life Insurance

Term policies provide coverage for a specific period, such as 10 or 20 years, often at a lower cost than whole life insurance or FEGLI.

Tips for Making Your Decision

• Review Your Benefits Statement: Understand exactly what you’re paying and what you’re getting.

• Compare Costs: Get quotes for alternative policies to see how they stack up against your FEGLI premiums.

• Consult a Financial Planner: A professional can help you assess your life insurance needs and recommend the best options for your situation.

FEGLI and Your Retirement Plan

Life insurance is just one piece of the retirement puzzle. Here’s how it fits into the bigger picture:

1. Balancing Coverage and Savings

Consider how your FEGLI premiums affect your ability to save or spend on other priorities, like healthcare, travel, or helping family members.

2. Planning for Long-Term Care

If your primary concern is protecting your family from financial hardship, you might explore long-term care insurance as an alternative or complement to life insurance.

3. Estate Planning

Ensure your beneficiaries understand how to claim FEGLI benefits or proceeds from any alternative policies. Update your estate plan to reflect any changes in your life insurance coverage.

Evaluating FEGLI in 2025 and Beyond

With rising costs and changing financial priorities, it’s essential to periodically reevaluate your life insurance needs. FEGLI can be a valuable benefit, but it isn’t the right solution for everyone. Taking the time to review your coverage, compare alternatives, and align your insurance with your retirement goals will help you make the best choice for you and your family.

Reassess Your FEGLI Choices Today

FEGLI premiums aren’t static, and neither are your financial needs. If you’re approaching retirement or already retired, now is the perfect time to evaluate your options. By understanding your costs, exploring alternatives, and aligning your life insurance with your retirement plan, you can make an informed decision that supports your financial security.