How to Use Your FEGLI Basic Insurance as a Living Benefit
If you are a federal employee or retiree who is enrolled in the Federal Employees’ Group Life Insurance (FEGLI) program, you may be familiar with the benefits that your life insurance provides to your beneficiaries or survivors when you die. But did you know that you can also use your FEGLI Basic insurance as a living benefit if you are terminally ill?
A living benefit is a lump sum payment that you can receive from your FEGLI Basic insurance while you are still alive, if you have a documented medical prognosis showing a life expectancy of no more than nine months. You can use this money for any purpose, such as paying for medical bills, living expenses, or fulfilling your final wishes.
The eligibility and amount of FEGLI living benefits
You are eligible to elect a living benefit if you are an employee, an annuitant, or a compensationer who is enrolled in the FEGLI program, and you have not assigned your FEGLI insurance to someone else. You can elect a living benefit only from your FEGLI Basic insurance, not from any Optional insurance that you may have.
The amount of your living benefit is equal to the FEGLI Basic insurance amount, plus any extra benefit for persons under age 45, that would be in effect nine months after the date that the Office of Federal Employees’ Group Life Insurance (OFEGLI) receives your completed claim for living benefits form. This amount is reduced by a nominal amount (4.9%) to make up for the lost earnings to the Life Insurance Fund because of the early payment of benefits.
You can choose to receive either a full or a partial living benefit, depending on your situation and preference. A full living benefit means that you receive the entire amount of your FEGLI Basic insurance as a lump sum payment, and your FEGLI Basic insurance coverage ends. A partial living benefit means that you receive a portion of your FEGLI Basic insurance as a lump sum payment, and your FEGLI Basic insurance coverage continues, but at a reduced amount. You can elect a partial living benefit in multiples of $1,000, up to 50% of the full living benefit amount.
The advantages and disadvantages of FEGLI living benefits
The main advantage of electing a living benefit is that you can access your FEGLI Basic insurance money while you are still alive, and use it for any purpose that you want or need. This can help you ease your financial burden and improve your quality of life, especially if you are facing high medical costs or other expenses. Another advantage is that you do not have to pay any income tax on the living benefit payment, as it is considered a death benefit.
The main disadvantage of electing a living benefit is that you will reduce or eliminate the amount of FEGLI Basic insurance that will be paid to your beneficiaries or survivors when you die. This can affect their financial security and well-being, especially if they depend on your income or benefits. Another disadvantage is that you may lose some of your FEGLI benefits or options, such as the right to convert your FEGLI Basic insurance to an individual policy, or the right to elect a survivor annuity for your spouse.
The process and requirements of FEGLI living benefits
To elect a living benefit, you need to fill out and submit the FE-8 form, which is the official document that you need to use to designate your FEGLI living benefit. You can obtain the form by contacting OFEGLI by calling 1-800-633-4542. This form is not available from your human resources office or the Office of Personnel Management (OPM).
You also need to provide a written statement from your physician that certifies your terminal illness and your life expectancy of no more than nine months. You need to sign and date the form in front of two witnesses who are at least 18 years old and who are not named as your FEGLI beneficiaries. Your witnesses also need to sign and date the form, and provide their names and addresses.
You need to submit the original form and the physician’s statement to OFEGLI, either by mail or by fax. You should keep a copy of the form and the statement for your records. You can check the status of your claim on the OFEGLI website, or by calling OFEGLI.
The impact and implications of FEGLI living benefits
Once OFEGLI approves your claim, you will receive your living benefit payment within 10 business days. You can choose to receive the payment by check or by direct deposit. You can also choose to have the payment made to a third party, such as a family member, a friend, or a charity, if you wish.
The election of a living benefit will have no effect on the amount of any Optional insurance that you have. You will continue to pay premiums for any Optional insurance that you have, unless you cancel it. However, the election of a living benefit will reduce or eliminate the amount of FEGLI Basic insurance that will be paid to your beneficiaries or survivors when you die. You should inform your beneficiaries or survivors of your decision to elect a living benefit, and discuss the impact and implications with them.
Conclusion
Electing a living benefit from your FEGLI Basic insurance can be a valuable and beneficial option if you are terminally ill and have a short life expectancy. It can help you access your FEGLI Basic insurance money while you are still alive, and use it for any purpose that you want or need. However, it can also have some drawbacks and risks, such as reducing or eliminating the amount of FEGLI Basic insurance that will be paid to your beneficiaries or survivors when you die, and affecting your FEGLI benefits or options.
That’s why you need to carefully weigh the pros and cons of electing a living benefit, and consult a financial advisor, such as The Benefit Coordinators, to help you make an informed and wise decision. The Benefit Coordinators can help you understand your FEGLI benefits and options, and create and implement a personalized and comprehensive financial plan.
