FEGLI open season

[kimmarg]

The other Federal employee thread made me think of this. There will be an open season for FEGLI (Federal Employees Group Life Insurance) in September. Anyone signing up? Signed up? Looked into it?

[Ricksun]

I used my Qualifying life event to up my life insurance when son was born.  Wife was on leave the entire 60 days this exemption allows, so we'll likely up her's to the maximum 5x salary just to avoid the hassle of paperwork/physical.  Note the effective date is a full year (Oct 2017) from sign-up, so if you're looking for something sooner, you'll have to go through the underwriting process. 

Ricksun

[fattest_foot]

We don't have any kids, so it's not something I find necessary (and in fact, I just cancelled my FEGLI last week as we have enough in investments for my wife to be okay if I died).

I wonder if anyone can speak to the likelihood of premiums increasing over the next several years? From my understanding, this open season will allow a massive influx of unhealthy individuals to opt in, which should make premiums for everyone rise in the mid to long term as the new enrollees die.

It sounds like FEGLI has a long cycle between open seasons to account for this; open season followed by higher premiums, and as the pool diminishes they eventually have another open season. Is my assessment correct?

[SomedayStache]

Last year I cancelled my FEGLI coverage as I found a 25 year term with a death payout of about 5 to 6 times what the FEGLI payout would have given me for a lower premium cost.

So nope, I won't be signing back up.   

[Catbert]

Long time federal employee who's been retired 8 years.  During my 35 year career there were only 2 FEGLI open seasons so if you want FEGLI without a physical get it during open season. For healthy, insurable employees FEGLI is generally a bad deal.  Term insurance outside of work is usually cheaper.  However, if you waived insurance when you were hired or now want more and have health issues that make you uninsurable (or think you might in the future ) FEGLI open season is a great deal. 

[DebtFreeinPhilly]

I just had a meeting with my CFP about the FEGLI, life insurance, and other federal benefits. For me, FEGLI is too expensive for the coverage I get. I am cancelling mine this year and opting for term life insurance that will cover 5x my salary at the same price I paid for FEGLI 1x my salary.

There have been talks about the premiums going up because of the open season. I don't know if they will or not but its still too expensive for me.

[MustachianAccountant]

I get term life insurance through a professional organization that's cheaper than the FEGLI.

Also keep in mind that Social Security has a death benefit if you're leaving behind a spouse that needs to care for children. I just found that out this year, and am reducing my life insurance amount accordingly - basically enough to cover my wife between our youngest turning 16, and our retirement accounts kicking in.

[MMM98]

Here is what everyone is missing about FEGLI: You get free insurance when you retire.  I think it is at age 65 at 50% of basic coverage.  It is a gift, a perk.  Not one that will do you a bit of good as you will be dead but your heirs will appreciate it.  For this reason and this reason alone I keep FEGLI basic.

You can do the math, the cost of the premiums until age 65 (assuming that I am correct) vice the payout, and do a rough ROI and I bet you will find that it might just be  an excellent deal, just not for you.

I have it as well as my spouse, one of us will win!

It looks like you get 25% of the basic amount free.  Here is a quote from OPM:
75% Reduction: your Basic coverage reduces 2% each month until it reaches 25% of its pre-reduction amount.  Your Basic is free (no premium) once the reductions begin and remains until your death.  Source: https://www.opm.gov/faqs/QA.aspx?fid=fd635746-de0a-4dd7-997d-b5706a0fd8d2&pid=8150a451-73c7-4b58-854e-29a84e3b2efa

[SomedayStache]

That's a good point Toymiester and one that I did consider.

That 75% reduction means you really won't end up with a large death benefit.   If you have a $100,000 salary then the free FEGLI coverage will eventually reduce down to only $25,000 payout.   And to get that $25k payout I will have to pay into the system for the next 30 years.  (Roughly paying in $12,000 over that time period assuming premiums don't rise)

I'm not sure that I will work with the government from now until retirement age.  If I job hop I will be glad that I've already purchased private and portable term life insurance.  (Especially if I develop a health condition in the future!)

One of the requirements to continue FEGLI into retirement is "You are entitled to retire on an immediate annuity under a retirement system for civilian employees".  I hope that I will be 'retiring' before I am eligible for an immediate annuity.  I'm hoping to retire early that's why I hang out here so much!

If I were to die at a young age the FEGLI coverage is not enough for my family.  Therefore I need to purchase life insurance or add multiples to the FEGLI.  As a young/healthy person it's cheaper to buy private insurance elsewhere.

I'm in my early 30s now.  If (and it's a big IF) I do end up working with the government until retirement age it's likely there will be at least one more open season.  At that distant point in the future maybe I will decide to jump back into FEGLI. 

[SomedayStache]

We don't have any kids, so it's not something I find necessary (and in fact, I just cancelled my FEGLI last week as we have enough in investments for my wife to be okay if I died).

I wonder if anyone can speak to the likelihood of premiums increasing over the next several years? From my understanding, this open season will allow a massive influx of unhealthy individuals to opt in, which should make premiums for everyone rise in the mid to long term as the new enrollees die.

It sounds like FEGLI has a long cycle between open seasons to account for this; open season followed by higher premiums, and as the pool diminishes they eventually have another open season. Is my assessment correct?

https://www.opm.gov/healthcare-insurance/life-insurance/program-information/#url=Historical-Rates

Looks like the cost for basic hasn't changed since 1999 when it actually went down in price (from the 1993 rates of .165/$1000 to 1999 rates of .1550/$1000).
The cost for some of the options has gone both up and down over the years depending on the age range you look at.

[fattest_foot]

That is correct, you can carry whatever coverage you have at retirement into retirement. So if you have option C, you can continue with it or drop down to B or even lesser coverage. If you have option B, you can't add C, but you can continue with B or lesser.

So the open season would be awesome if you were looking to add coverage and are within a few years from retirement.

But for most Mustachians this doesn't apply, as most of us aren't going to make it to the MRA. And you'd still have to actually think there's value in what the FEGLI offers, which it seems many believe is overpriced.

[forummm]

Do you really need life insurance? Most of us are rapidly getting to the point where we can live pretty nice lives (for 30-50 years) without ever needing income again. That should be more than enough money to support your kids until they turn 18.

[kimmarg]

Interesting perspectives, thanks! I signed up when I had a qualifying life event last year (kid) mainly because I didn't want to deal with figuring out term insurance while we had a newborn. FELGI was fill it out and forget it so there it is. Now with open season coming up I should really do the math on what I actually need.

[SimplyMarvie]

I'm considering whether or not to keep the FEGLI that I opted into when I got hired. The only thing that is holding me back about opting into a private market policy (or WAEPA, although I think I'm not quite old enough for that to save me money) is that we're posted outside the US, which means that there can be issues about claims, cause of death, etc. when people die abroad.

Anyone wiser than me know anything about that? I've looked into some policies, but pretty much thrown up my hands because either the issue wasn't addressed in the contract or I couldn't get enough specific information to figure out whether it was specified in the contract.

[DebtFreeinPhilly]

SimpeMarvie,
Are you looking for info about filing a claim from overseas with private life insurance or FEGLI? Either way, I would just ask the respective company. They should be able to tell you pretty easily.

Quick Google search brought this up for FEGLI:https://www.opm.gov/healthcare-insurance/life-insurance/death-claims/. It has a few PDFs about filing claims, who can file, and so on.