How Federal Employee Life Insurance Cost Is Calculated
Federal employee life insurance cost is shaped by the group structure of the Federal Employees Group Life Insurance program and by the employee's age at enrollment. FEGLI is not priced like an individual policy; premiums are pooled across the workforce, which keeps initial rates low but causes them to rise sharply after age 70. The cost you see on each pay period depends on the coverage option you select, your salary, and whether you are a regular employee or a retired annuitant.
- How Federal Employee Life Insurance Cost Is Calculated
- FEGLI Premium Ranges by Coverage Option
- Why Federal Employee Life Insurance Cost Rises After Age 70
- Comparing FEGLI to Individual Life Insurance
- Strategies to Reduce Federal Employee Life Insurance Cost
- Who Pays for Federal Employee Life Insurance
- Is Federal Employee Life Insurance Cost Worth It
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The base coverage in FEGLI is often the first thing new hires select, and its premium is modest relative to the death benefit. Understanding the three FEGLI options — Basic, Option A, Option B, and Option C — is essential because the cost of each scales differently with coverage amount and age.
FEGLI Premium Ranges by Coverage Option
The following table summarizes the general premium structure for each FEGLI option. Exact rates are set by the Office of Personnel Management and are adjusted periodically, so use these figures as a reference rather than a contract.
| Coverage Option | How Premium Is Determined | Cost Pattern |
|---|---|---|
| Basic | Two times annual salary, rounded to next $1,000, plus $2,000 | Low at younger ages; increases every five years |
| Option A | Flat $2,000 standard benefit | Low fixed premium for the term of coverage |
| Option B | Multiple of salary, up to five times | Moderate initially; increases significantly with age |
| Option C | Multiple of coverage for family members | Lower per-thousand rate than Option B; increases with age |
Why Federal Employee Life Insurance Cost Rises After Age 70
The most notable feature of FEGLI cost is the premium spike that occurs around age 70. Because Basic and Option B coverage are written as temporary insurance tied to employment or annuitant status, the risk pool ages with the insured group. When employees retire and stay on the program, the insurer recalculates premiums to reflect the higher mortality probability of the older cohort. For many retirees, the annual cost of FEGLI Basic can approach or exceed what an individual underwritten policy would cost.
Comparing FEGLI to Individual Life Insurance
Federal employee life insurance cost is often lower than individual premiums at younger ages, but the comparison reverses later in life. An individual term or whole life policy locks in a rate at underwriting, so the premium does not increase simply because the policyholder ages. FEGLI does not offer that lock-in, which means retirees face a choice between paying rising FEGLI premiums or converting to an individual policy. The decision depends on health, the amount of coverage needed, and how long the coverage must last.
Strategies to Reduce Federal Employee Life Insurance Cost
Employees and retirees have several levers to manage FEGLI expense without dropping coverage entirely. Reducing Option B and Option C coverage to match actual needs is the most direct method. Dropping coverage that is no longer necessary — for example, when children reach adulthood — removes the age-driven cost on that option while keeping Basic or Option A in force.
- Review FEGLI elections during open season or after a life event such as marriage, divorce, or the birth of a child.
- Consider whether an individual policy with a level premium can replace Option B at a lower long-term cost.
- Use the OPM fee calculator or your payroll office to model premium costs at different coverage levels.
- Remember that FEGLI Basic is free for the first $10,000 of coverage for most employees, which keeps the floor cost low.
Who Pays for Federal Employee Life Insurance
The employee typically pays the full premium for FEGLI through payroll deductions. There is no employer contribution toward the cost of Basic, Option A, Option B, or Option C. For retirees, premiums are deducted from the annuity payment. In some cases, a court order may require an employer to withhold premiums for a former spouse, but the underlying cost structure remains the same.
Is Federal Employee Life Insurance Cost Worth It
The answer depends on how long you need the coverage and whether you have health issues that would make individual underwriting difficult. FEGLI is valuable because it does not require proof of insurability at the time of enrollment or conversion. If you retire in good health and can qualify for an individual policy, replacing FEGLI with a level-premium term policy often reduces long-term cost. If health or age makes individual coverage expensive or unavailable, keeping FEGLI — even at its higher later-year premiums — may be the most practical choice.