Questioning the superiority of FEGLI Option B as the top life insurance option?
For federal employees, the Federal Employees' Group Life Insurance (FEGLI) program offers a simple and straightforward way to secure life insurance. However, when it comes to large coverage amounts, FEGLI Option B may not be the most cost-effective choice.
The cost of holding $1,000,000 of FEGLI Option B from age 25 to 65 is substantially higher than the cost of private term life insurance over the same period. Similarly, the cost of holding $500,000 of FEGLI Option B is significantly more expensive than private term life insurance. The total cost for someone needing $500,000 of coverage, for instance, can amount to nearly $67,500, while the total premium paid for keeping FEGLI B until age 65 for $1,500,000 of coverage is an extremely high comparison to private term life insurance over the same period.
FEGLI Option B charges premiums based on age brackets, with costs increasing every five years. In contrast, the cost per $100,000 of coverage for FEGLI Option B varies based on these age brackets. At younger ages, FEGLI B can be affordable, with a 25-year-old who keeps $100,000 of FEGLI B until retirement at 65 spending about $13,500 in total premiums. However, as one ages, costs for FEGLI Option B increase dramatically, making private term life insurance potentially more cost-effective.
The task of finding the best life insurance option can be daunting due to various types available, such as term, whole, and Universal Life. But for those needing large amounts of coverage and planning to hold their life insurance coverage for several decades, the cost-effectiveness of private term life insurance is likely to be more favourable than FEGLI Option B.
It's important to note that life insurance is an important part of a financial plan. FEGLI Option B, the optional additional coverage in multiples of a salary, deserves closer examination for federal employees. But for those considering large coverage amounts, a thorough comparison between FEGLI Option B and private term life insurance is essential to make an informed decision.
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