Maximizing Your Coverage: Comparing Term Life Plans with FEGLI
- Dan De La Torre
- 13 minutes ago
- 6 min read
Life insurance is one of the most essential tools for protecting your family’s financial future. As a federal employee, you likely have access to the Federal Employees’ Group Life Insurance program (FEGLI). But is it enough? And more importantly, is it the most cost-effective option for your situation?
In this article, we’ll break down how FEGLI works, explore the benefits of private term life insurance, and help you determine whether it’s time to compare options and potentially maximize your coverage.
What Is FEGLI and How Does It Work?
FEGLI is the default life insurance program for federal employees. It includes Basic coverage (partially subsidized by the government) and three optional add-ons—Options A, B, and C—which are fully paid by the employee.
To simplify the comparison, we’ll use a hypothetical example: Jane Doe is 45 years old and earns $60,000 annually. Here’s how each FEGLI option would apply to her:
Option | What It Covers | Who Pays | Example (Age 45, $60K salary) | When to Consider It |
Basic | Annual salary (rounded up) + $2,000 | Govt pays 1/3, you pay the rest | $60,000 in coverage for ~$8/month (you pay); includes free bonus coverage under 45 | Automatic for new hires; good foundation coverage |
Option A | Flat $10,000 in extra coverage | You pay 100% | $10,000 more coverage for ~$0.75/month | Helps cover burial or final expenses |
Option B | 1–5x your annual salary | You pay 100% | 3× $60,000 = $180,000 coverage for ~$25/month Increases every 5 years | Good for income replacement, mortgage protection, and kids’ expenses |
Option C | Family: $5,000 per unit for spouse, $2,500 per unit per child (1–5 units allowed) | You pay 100% | 3 units = $15,000 spouse / $7,500 per child for ~$3.90/month Rates rise with age | Helps cover funeral costs or short-term support for loved ones |
What Most People Don’t Realize
What many federal employees may not realize is that FEGLI premiums increase every five years, starting at age 35, and these increases can be substantial. Unlike private term life insurance, which typically locks in level premiums for the duration of the term, FEGLI gets more expensive as you age.
This matters even more after retirement, when your ability to continue FEGLI coverage becomes limited and costly. Unfortunately, many employees never revisit their FEGLI elections, even after significant life events such as getting married, having children, or assuming new financial responsibilities.
Advantages and Disadvantages of FEGLI
Advantages of FEGLI
FEGLI is convenient. You’re automatically eligible for Basic coverage, and there’s no medical exam if you enroll when first hired. Premiums are deducted directly from your paycheck, making it a low-effort benefit.
Disadvantages of FEGLI
However, the simplicity comes at a price. FEGLI rates increase sharply every five years, especially after age 50. Coverage options are limited, and once you retire, continuing the same level of protection can get expensive.
What Is Private Term Life Insurance?
Private term life insurance is a policy you purchase on your own, outside of your federal benefits. It provides coverage for a set period—typically 10, 20, or 30 years—and pays a tax-free death benefit to your chosen beneficiaries if you pass away during that time.
Advantages and Disadvantages of Private Term Life Insurance
Advantages of Private Term Life
Private term life insurance offers stability and control. One of its biggest strengths is level premiums; your cost stays the same for the entire term (10, 20, or 30 years), making it easy to plan around. It’s also highly customizable, allowing you to choose your coverage amount, term length, and even add special riders based on your personal needs. And since it’s independent of your employer, it’s fully portable, meaning you can keep your coverage no matter where your career takes you.
Additional features may include:
Waiver of premium (if disabled)
Accelerated death benefit
Return of premium options (on select policies)
Conversion to permanent life in some cases
Disadvantages of Private Term Life Insurance
The main hurdle with private term life is underwriting. Most plans require a health questionnaire or medical exam, which could limit options for individuals with serious medical conditions. It may also take more time upfront to research, apply, and compare quotes. However, for those in good health, the long-term savings and flexibility often far outweigh the initial effort.
Key Differences: FEGLI vs. Private Term Life
Feature | FEGLI | Private Term Life Insurance |
Underwriting | None (if enrolled on time) | Usually required (but worth the savings) |
Premiums | Age-based, increase every 5 years | Level premiums for full term |
Customization | Limited | Highly customizable |
Portability | Limited (expensive post-retirement) | Fully portable |
Ease of Use | Payroll deduction | Monthly auto-pay or invoice |
A Real-World Example
Let’s look at how much $500,000 in life insurance might cost through FEGLI versus private term life for a 45-year-old federal employee:
FEGLI Option B (5x salary): Approx. $62/month at age 45. By age 55, this climbs to over $130/month. By age 60+, expect over $240/month.
Private 20-Year Term Life Policy: Approx. $55/month (for a healthy, non-smoking 45-year-old male). This stays flat for the full 20 years
Potential Savings: Over $10,000 across the life of the policy, while locking in stable rates and coverage.
When Should You Stick with FEGLI?
FEGLI can be a smart option depending on your situation. For newly hired federal employees, especially those without existing life insurance, the convenience of automatic enrollment and no medical exam makes it an easy way to secure basic protection. It's also beneficial for individuals who may not qualify for private term life due to health issues or pre-existing conditions.
If your coverage needs are short-term, perhaps while transitioning careers, relocating, or paying off temporary debt, FEGLI can provide a reliable safety net.
When Should You Consider Term Life Instead?
Private term life insurance may be the better option if you’re looking for affordable, long-term stability. It's especially worth exploring if:
You're in good health and can qualify for level premiums
You're planning 20–30 years for your family’s financial future
You want consistent monthly costs that don’t increase with age
You're approaching retirement, and FEGLI’s rates are climbing fast
If you’re looking to lock in a high coverage amount at a lower cost for the long haul, private term life typically wins in both flexibility and value.
How to Evaluate Your Coverage Needs
Choosing the right life insurance isn’t just about comparing prices; it’s about understanding what your family would need if something happened to you.
Start by considering the big picture:
Who relies on your income?
What debts would need to be paid off?
Do you want to help cover college tuition or long-term care?
A few tools can help:
Use online calculators to estimate your needs
Reassess your coverage after major life events like marriage, having children, buying a home, or nearing retirement
Talk to a financial advisor if you’re unsure where to start
How Much Coverage Do You Need?
There’s no magic number, but there are some common benchmarks. A good rule of thumb is to carry 7 to 10 times your annual income in life insurance coverage.
Factors to include in your estimate:
Income replacement for your spouse or dependents
Mortgage or other major debt payoff
College tuition or educational savings for children
End-of-life costs (funeral, medical bills)
Charitable or legacy giving goals
Ultimately, your coverage should reflect not just your financial obligations, but your values and long-term vision for those you care about.
Final Thoughts
As a federal employee, you already have access to valuable benefits like FEGLI. But that doesn’t mean you should stop there. Private term life insurance can offer more stability, lower long-term costs, and better alignment with your personal goals.
By understanding the options and running the numbers, you can maximize your coverage and give your family the financial peace of mind they deserve.
Ready to Take Action?
Review your FEGLI coverage using your federal HR system or opm.gov
Get a private term life quote from a reputable provider
Evaluate your long-term needs and decide which plan offers the best value for your family
Talk to an advisor familiar with federal benefits to ensure you’re making the most of both worlds
Don’t wait until open season or retirement to find out you’ve been overpaying or underinsured. A little time spent now could save your family thousands and offer peace of mind for years to come.
Need Help Reviewing Your Options?
At FedAdvantage, we specialize in helping federal employees like you compare, customize, and secure the right life insurance coverage. Whether you’re reviewing your current FEGLI benefits or exploring private options, our team is here to help.
Contact us today to request a no-obligation quote or speak with an advisor.
