The Essentials of FEGLI Living Benefits: A Thorough Guide

Do you know what FEGLI living benefits are and how they can help you in case of a terminal illness? Do you know how to keep or change your FEGLI basic coverage after retirement? Do you know how your choices can affect your finances and your heirs? If you are a federal employee or annuitant, these are some of the questions that you need to answer when planning for your future. FEGLI, or Federal Employees Group Life Insurance, is an important part of your financial plan, and you need to understand the basics of its living benefits, which can provide you with a lump sum payment while you are still alive. In this comprehensive guide, we will explain what FEGLI living benefits are, how they work, and what you need to consider when choosing them. We will also discuss the options and consequences of keeping or changing your FEGLI basic coverage after retirement.

What are FEGLI living benefits and how do they work?

FEGLI living benefits are a feature of your FEGLI basic coverage that allows you to receive a lump sum payment of your life insurance while you are still alive, if you are diagnosed with a terminal illness and have a life expectancy of nine months or less. This payment can be a valuable source of income for you and your family, especially if you are facing unexpected medical expenses or other financial challenges.

The amount of the payment depends on whether you are a federal employee or an annuitant. If you are a federal employee who has not retired yet, you can choose to receive a partial amount of your FEGLI basic coverage as a living benefit, and leave the rest to your beneficiaries when you die. You will continue to pay premiums for the remaining amount of your coverage, and your optional coverage (FEGLI A, B, or C) will not be affected. If you are a federal annuitant, whether under FERS or CSRS, you can only receive the full amount of your FEGLI basic coverage as a living benefit, and you will not have any coverage left for your beneficiaries when you die. You will also stop paying premiums for your basic coverage, but your optional coverage will not be affected.

The payment that you receive as a living benefit is reduced by the amount of lost earnings to the life insurance fund, which means that you will not get the full face value of your coverage. You also cannot receive a living benefit if you have assigned your insurance to someone else, such as a lender or a relative. If you survive longer than the expected nine months, you do not have to return the payment that you received.

What are the options and consequences of keeping or changing your FEGLI basic coverage after retirement?

Another important decision that you need to make regarding your FEGLI coverage is whether to keep or change your FEGLI basic coverage after retirement. This decision can have a significant impact on your finances and your heirs, so you need to weigh the pros and cons carefully. You have three main options: keep all of your FEGLI basic coverage, keep half of it, or drop it altogether.

Keeping all of your FEGLI basic coverage means that you will continue to pay the same premiums as before retirement, and your coverage will remain the same until you die. This option can provide you with the maximum amount of protection and peace of mind, especially if you have a large family or a lot of debts. However, this option can also be very expensive, especially as you get older and your premiums increase. You may also end up paying more in premiums than the amount of coverage that you have, or the amount that your beneficiaries will receive.

Keeping half of your FEGLI basic coverage means that you will pay half of the premiums as before retirement, and your coverage will be reduced by 50%. This option can provide you with a balance between protection and cost, especially if you have a moderate family or debt situation. However, this option can also be costly, especially as you get older and your premiums increase. You may also end up paying more in premiums than the amount of coverage that you have, or the amount that your beneficiaries will receive.

Dropping your FEGLI basic coverage means that you will stop paying any premiums, and your coverage will end when you retire. This option can save you a lot of money, especially if you have a small family or no debts. However, this option can also leave you and your family unprotected, especially if you have a terminal illness or an unexpected death. You may also lose the opportunity to receive a living benefit, or to leave a legacy to your heirs.

One thing to note is that you can keep 25% of your FEGLI basic coverage at no cost, which means that you will not pay any premiums, and your coverage will be reduced by 75%. This option can be a smart move, especially if you want to have some protection and the possibility of a living benefit, without paying any extra money. However, this option can also be insufficient, especially if you have a large family or a lot of debts. You may also end up leaving a small amount of money to your beneficiaries, or none at all.

Conclusion

FEGLI living benefits and FEGLI basic coverage are two key aspects of your financial plan as a federal employee or annuitant. You need to understand how they work, and what you need to consider when choosing them. By doing so, you can make the best decisions for yourself and your family, and prepare for the future with confidence and security.