Federal Employee Life Insurance (FEGLI) 2026: Is Government Coverage Enough?

Quick Answer

FEGLI Basic — the government-subsidized life insurance — is an excellent deal for most federal employees, especially younger workers. The options (especially Option B at higher age bands) often become expensive compared to private term life. A healthy federal employee in their 30s or 40s can typically buy more coverage at lower cost through a private term policy than through FEGLI Option B. The smart strategy: keep FEGLI Basic (the government pays 2/3 of the premium), evaluate Option B against term life quotes annually, and have a clear plan for coverage in retirement.

How FEGLI Is Structured

FEGLI has four coverage components:

Basic Life Insurance

Coverage amount: Your annual base salary rounded up to the next $1,000, plus $2,000. (Example: $87,500 salary → rounds to $88,000 + $2,000 = $90,000 in coverage.)

Cost split: The government pays 2/3 of the Basic premium; you pay 1/3. In 2026, the Basic premium is $0.15 per $1,000 of coverage biweekly. For $90,000 in coverage:

• Total biweekly premium: $13.50
• Government pays: $9.00
• Your cost: $4.50 biweekly ($117/year)

For $90,000 in term life coverage at $117/year, Basic is almost always a bargain — even private term is rarely cheaper than $1.30/$1,000 annually for similar coverage.

Automatic enrollment: All new federal employees are automatically enrolled in Basic unless they waive it in writing. Given the favorable government subsidy, waiving Basic is almost never advisable.

Option A: Standard Additional

Fixed additional coverage of $10,000.

• Employee pays full premium (no government subsidy)
• 2026 biweekly premium by age band: $0.43 (under 35) to $6.00 (65+)
• Under 35: $11.18/year for $10,000 in coverage — cheap additional coverage
• At 55–59: $62.40/year for $10,000 — still reasonable
• Option A premium increases sharply after 60

Verdict: Option A is inexpensive for young employees and a minor budget item at most ages. Keeping it through your early career is generally fine.

Option B: Additional Optional

Coverage in multiples of your annual salary: 1×, 2×, 3×, 4×, or 5× salary.

• Employee pays full premium (no government subsidy)
• Premiums change every 5 years as you enter a new age band

This is where FEGLI becomes expensive. Here are the 2026 biweekly rates per $1,000 of Option B coverage by age:

For a 50-year-old earning $100,000 who wants 3× salary ($300,000) in Option B coverage:

• Annual FEGLI Option B cost: $300 × $7.54 = $2,262/year

A healthy 50-year-old male can typically purchase a 10-year $500,000 term life policy for $1,200–$1,500/year from a private insurer — more coverage at lower cost.

Option C: Family Coverage

Option C covers dependents — spouse and eligible children. Coverage amounts are fixed in multiples:

• 1× ($5,000 spouse, $2,500 per child)
• 2× ($10,000 spouse, $5,000 per child)
• 3× ($15,000 spouse, $7,500 per child)
• 4× ($20,000 spouse, $10,000 per child)
• 5× ($25,000 spouse, $12,500 per child)

Employee pays full premium. Rates are modest for younger employees but increase with age, following the same premium escalation pattern as Option B.

FEGLI Premium vs Private Term: Side-by-Side Comparison

The critical comparison is Option B vs private term life insurance for the same coverage amount:

Scenario: Federal employee needing $500,000 in life insurance

Private term wins at every age for healthy employees. The advantage is most dramatic for employees in their 30s and 40s. By 50, both become expensive, but term is still typically cheaper for the same amount of coverage.

The exception: If you have health conditions that would disqualify you from private term insurance or make it very expensive, FEGLI Option B has no medical underwriting — you can elect or maintain it without proving insurability.

FEGLI in Retirement: The Coverage Reduction Problem

This is the most important FEGLI planning point that surprises federal employees.

FEGLI Basic in retirement automatically reduces according to a schedule based on your election at retirement:

The "full" election costs extra premium during your working years. Without it, Basic coverage shrinks to 25% of your working-year amount by the time you're around 77.

FEGLI Option B in retirement: You can choose to have Option B remain in force with premiums continuing (at retirement-age rates), or decline it. Option B can be cancelled at any time. The premium at retirement ages is very high — $19.76/$1,000 annually for employees 65+. For $500,000 in Option B coverage, that's $9,880/year.

Most federal retirees self-insure with accumulated assets rather than paying Option B premiums in retirement. By age 65 or 70, children are typically financially independent and a surviving spouse's needs may be covered by the FERS survivor annuity and Social Security.

How Much Life Insurance Does a Federal Employee Actually Need?

The standard calculation is 10–12× annual income. But federal employees have a built-in income replacement tool in their retirement package: the survivor annuity.

A more useful framework for federal employees:

1. Income replacement need: Would your spouse maintain their standard of living if you died tomorrow?
2. Subtract survivor annuity: FERS provides up to 50% of your pension to your spouse for life. CSRS provides up to 55%.
3. Subtract Social Security survivor benefit: Your spouse may be eligible for your Social Security as a survivor benefit.
4. Subtract existing assets: Home equity, savings, investments, TSP.
5. The remaining gap is what life insurance needs to cover.

For a dual-income federal couple with a FERS survivor annuity and Social Security survivor benefit, the actual life insurance need may be significantly less than 10× income — perhaps $250,000–$500,000 to cover the transitional period, pay off the mortgage, and provide a buffer.

For a single-income household with young children and a large mortgage, 10× income ($700,000–$1,000,000) is appropriate and the case for term life over FEGLI Option B is even stronger.

When FEGLI Option B Makes Sense

FEGLI Option B is worth keeping when:

1. You have health conditions that make private term insurance unavailable or unaffordably expensive
2. You're in an age band under 40 — rates are cheap and the simplicity of payroll deduction is convenient
3. You missed private term enrollment during good health and cannot qualify for comparable coverage now
4. You want a small amount of additional coverage (1–2× salary) without the administrative burden of a separate policy

For healthy federal employees between 40 and 55 with clean medical histories: get a private term life quote. The savings are almost always material.

Common Mistakes: Do This, Not That

❌ Waiving FEGLI Basic as a new employee — The government pays 2/3 of the premium. This is one of the most subsidized benefits you receive. Very few employees should waive Basic coverage.

✅ Keep FEGLI Basic through your entire federal career — the subsidy makes it excellent value. Only reconsider in retirement when coverage reduces and you may be self-insuring anyway.

❌ Assuming FEGLI Option B is the right life insurance choice without comparing to term — Especially in the 40–55 age range, FEGLI Option B is significantly more expensive than private term for healthy employees.

✅ Get a private 20-year term life insurance quote at every major life event — marriage, first child, home purchase — and compare it to your FEGLI Option B premium at your current age.

❌ Not planning for the Basic coverage reduction at retirement — If your $90,000 Basic coverage reduces to $22,500 by age 77, and you expected that coverage to protect your spouse, you've underestimated the gap.

✅ Elect the "no reduction" option for Basic at retirement if you need permanent coverage, or plan explicitly to self-insure with TSP and other assets by the time coverage reduces.

❌ Paying FEGLI Option B premiums in retirement — At $19.76/$1,000 annually in the 65+ age band, $300,000 of Option B costs nearly $6,000/year. Most retirees would be better served withdrawing from TSP than paying FEGLI premiums.

✅ Replace life insurance need with self-insurance as assets grow — by retirement, your surviving spouse's income from FERS annuity + Social Security + TSP typically covers most income replacement needs without expensive life insurance premiums.

Step-by-Step FEGLI Optimization Checklist

• Confirm you are enrolled in FEGLI Basic — waiving it as a new employee is almost always a mistake
• Calculate your Basic coverage amount: salary rounded to next $1,000 + $2,000
• Review your Option B enrollment and coverage multiple (1×–5× salary)
• Get a private term life quote for equivalent coverage using your current health status
• Compare annual FEGLI Option B premium vs annual private term premium for the same dollar amount
• If private term wins and you're in good health, apply for private term before dropping FEGLI (do not drop first — you need to qualify for replacement coverage)
• Calculate your total life insurance need: 10–12× income minus survivor annuity, SS survivor benefit, and existing assets
• Review Option C (family) coverage for adequacy — $25,000 max spouse coverage is minimal for most families
• Plan for retirement coverage: elect Basic reduction level, decide if Option B continues or terminates
• Update FEGLI beneficiary designations — they supersede your will

FAQ

Q: Can I change my FEGLI options at any time?

A: You can always reduce or cancel FEGLI options. Increasing coverage or adding new options is restricted — you can typically only add coverage during open seasons (which are rare, perhaps once every 10–15 years), after certain qualifying life events (marriage, divorce, birth of child), or by providing evidence of insurability (medical exam) during your first 31 days of employment. This underwriting-free window at the start of employment is important — it's the one time you can elect full options regardless of health.

Q: Does FEGLI pay out for any cause of death?

A: Yes, FEGLI Basic and the optional coverages pay for any cause of death — accidental, illness, or natural causes. There is no exclusion for pre-existing conditions or cause of death restrictions, which is one of FEGLI's advantages as group coverage. Accidental Death and Dismemberment (AD&D) coverage is included with Basic at double the face amount for accidental deaths.

Q: My federal employer is offering an open enrollment for FEGLI. Should I increase my Option B?

A: FEGLI open seasons are rare and allow increased coverage without medical underwriting. If you have health conditions that prevent you from qualifying for private term life insurance, this is a valuable opportunity. If you're healthy, compare the cost of increasing FEGLI Option B to what you'd pay for private term — healthy individuals almost always find term cheaper. Get a term quote before the open season closes.

Q: What happens to FEGLI if I take a leave of absence or LWOP?

A: FEGLI coverage continues for up to 12 months of non-pay status. After 12 months, coverage terminates. When you return to pay status, coverage is automatically restored without medical underwriting — you don't have to requalify. If you're going on extended unpaid leave, consider whether you need to arrange separate coverage for any gap beyond 12 months.

Q: How does FEGLI work if I die before retirement?

A: FEGLI pays your designated beneficiaries within weeks of verified death. Basic, Option A, Option B, and Option C each have separate beneficiary designations, or they can all name the same beneficiary. If no beneficiary is designated, FEGLI pays in this order: widow/widower, children equally, parents, executor of your estate, next of kin. Keep your designations current — the FEGLI beneficiary form controls regardless of what your will says.

Related Tools

• Net Worth Calculator — Understand your complete financial picture and determine how much life insurance you actually need based on your assets
• Retirement Calculator — Project your retirement income to assess whether a FERS survivor annuity adequately protects your spouse
• Emergency Fund Calculator — Ensure your emergency fund is sized appropriately to complement — not be confused with — your life insurance coverage