Should I Keep FEGLI After Retirement?

When It Makes Sense

• Good fit: You have health conditions that would make qualifying for private life insurance difficult or expensive. FEGLI does not require new medical underwriting for retirees who maintain eligible coverage into retirement, so it can preserve guaranteed death benefits when market alternatives might be unavailable or costly.
• Good fit: You need straightforward term coverage for a limited period and value the convenience of keeping a federal benefit without shopping for new policies. This can make sense if you have dependents, a mortgage, or other obligations you expect to diminish over time.
• Good fit: You want to retain familiar coverage that your beneficiaries already understand and that pays through the federal benefits system. This can reduce confusion for a spouse or executor who otherwise would need to navigate a new insurer’s claims process.

When You Should Avoid It

• Warning sign: Premiums in retirement rise substantially with age, especially under Option B and the Basic insurance post-age-50 cost schedules. If the increasing premiums strain your fixed retirement income, you may be paying more than a private alternative would cost for the same benefit.
• Warning sign: You primarily need life insurance for estate planning, wealth transfer, or final-expense coverage rather than income replacement. FEGLI is term coverage with no cash value, so it may not fit goals that require permanent insurance features.
• Warning sign: You are in excellent health and can qualify for a level-premium private term policy that locks in rates for 10, 15, or 20 years. In that situation, private coverage may be cheaper over the same period and offer more predictable budgeting.

Pros and Cons

Pros

• No medical underwriting is required at retirement if you meet eligibility rules, which protects insurability for retirees who developed health conditions during federal service.
• The program is backed by the federal government and offers a predictable claims process for beneficiaries familiar with federal benefits.
• Coverage choices are flexible at retirement: you can elect no reduction, 50% reduction, or 75% reduction for Basic insurance, and you can cancel or reduce Optional coverage to manage premiums.

Cons

• Cost increases as you age can make FEGLI significantly more expensive in your 60s, 70s, and beyond compared to the level-premium private term policies some retirees qualify for.
• It is term insurance only, meaning premiums paid do not build cash value and coverage ends if premium payments stop, with no payout unless you die during the covered period.
• Once you cancel certain coverage in retirement, you generally cannot reinstate it without meeting specific requirements, so reducing or dropping coverage may be irreversible.

Decision Checklist

• Do I currently have health issues or high-risk factors that would make a new private life insurance policy expensive or impossible to obtain?
• How will my FEGLI premiums change at the next age bracket, and do they fit comfortably within my projected retirement budget?
• Have I compared the after-tax cost and benefit structure of FEGLI against at least one private term or permanent life insurance quote?
• Will my dependents still rely on this death benefit five, ten, or fifteen years from now, or will other income sources cover their needs?

Alternatives to Consider

Private term life insurance through an individual policy may offer level premiums for a fixed period, such as 10 or 20 years, which can be cheaper for healthy retirees than age-increasing FEGLI rates. Permanent life insurance, including whole or universal life, can provide lifelong coverage and cash value accumulation but typically costs more and requires careful evaluation. Some retirees self-insure by relying on pensions, savings, and Social Security survivor benefits if debts are paid and dependents are financially independent. Another option is to reduce FEGLI coverage, for example by selecting the 75% reduction option for Basic insurance or lowering Option B multiples, which lowers premiums while keeping some protection in place. If you have a spouse with federal coverage, compare the relative costs and benefits of each policy rather than automatically maintaining both at full levels.

Final Recommendation

Keep FEGLI into retirement if your health makes private coverage unaffordable or unavailable, or if you want simple, guaranteed coverage with no medical exam. Consider reducing coverage levels to manage costs, and re-evaluate at each age-bracket increase. If you are healthy, have stable retirement income, and can qualify for a competitively priced private policy, comparing quotes is usually worthwhile. Because this decision involves insurance costs, beneficiary needs, and federal benefit rules, consult an Office of Personnel Management benefits counselor, your agency’s retirement specialist, and a licensed insurance professional before making changes.