Any reason to keep my Life Insurance (FEGLI)?

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evilityb
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Any reason to keep my Life Insurance (FEGLI)?

Post by evilityb » Mon Dec 04, 2017 1:37 pm

Hello fellow Bogleheads

I have been signed up for the basic life insurance through my employer (Federal Government) since I was hired. I didn't realize I am paying $15 per pay check for this (shame on me for not noticing!) for a total of $390 annually. I am single with no dependents; my parents are financially fine and I'm not interested in being responsible for my siblings financial well being, so, nobody is in dire need of my support. Plus I have a net worth of about $200k that would go to them. I am also a healthy 34 year old.

As far as I can tell, I can sign up for FEGLI insurance again during the open enrollment period or after a qualifying life event.

Is there anything I need to know before cancelling it? Anything I should consider that I haven't thought of?

Thanks!
She/her/hers | Make sure the fortune that you seek is the fortune that you need - Ben Harper

brad.clarkston
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by brad.clarkston » Mon Dec 04, 2017 1:42 pm

Nope probably not in your case.

Super Hans
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by Super Hans » Mon Dec 04, 2017 1:58 pm

At the water cooler, I try to spread the word that FEGLI is a bad deal--unless your health isn't great. For about the same price as the basic FEGLI premium, I bought a $1 million/20-year policy.

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evilityb
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by evilityb » Mon Dec 04, 2017 2:01 pm

Super Hans wrote:
Mon Dec 04, 2017 1:58 pm
At the water cooler, I try to spread the word that FEGLI is a bad deal--unless your health isn't great. For about the same price as the basic FEGLI premium, I bought a $1 million/20-year policy.
Yup, sounds about right. I balked when I realized what I was paying for the benefit of $104k. :oops:
She/her/hers | Make sure the fortune that you seek is the fortune that you need - Ben Harper

bsteiner
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by bsteiner » Mon Dec 04, 2017 2:24 pm

You get to keep 25% of the coverage after you retire at no cost. So if you're sufficiently close to retiring, it can be a good deal.

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Bruce
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by Bruce » Mon Dec 04, 2017 3:00 pm

You may not have an insurable need at all, and If you are in good health and otherwise insurable, FEGLI may not be that great a deal compared to alternatives on the term insurance market.

But when you are comparison shopping, make sure you are comparing the correct amounts.

FEGLI basic automatically includes a better benefit for those under 45.

From the OPM website
If you are under age 45, you automatically have extra coverage without paying any additional
premium.
This Extra Benefit increases the amount of Basic insurance payable at the time of
your death if you die before age 45.
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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steelerfan
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by steelerfan » Mon Dec 04, 2017 3:19 pm

Nope. Dump it! Today!
"Honor the Lord with your wealth and with the firstfruits of all your produce;" Prov 3:9

Slacker
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by Slacker » Mon Dec 04, 2017 3:26 pm

Bruce wrote:
Mon Dec 04, 2017 3:00 pm
You may not have an insurable need at all, and If you are in good health and otherwise insurable, FEGLI may not be that great a deal compared to alternatives on the term insurance market.

But when you are comparison shopping, make sure you are comparing the correct amounts.

FEGLI basic automatically includes a better benefit for those under 45.

From the OPM website
If you are under age 45, you automatically have extra coverage without paying any additional
premium.
This Extra Benefit increases the amount of Basic insurance payable at the time of
your death if you die before age 45.
To be a little more explicit on the benefit of younger fed employees:
Younger employees are covered by an additional Basic insurance provision called the Extra Benefit, however, which doubles the amount of Basic insurance payable at no extra cost for enrollees age 35 or younger. Beginning on an enrollee's 36th birthday, the Extra Benefit decreases 10% each year until age 45, after which, there is no Extra Benefit. So, for a 40-year-old employee, (i.e., 5 years younger than age 45) the benefit increases 10% for each year under age 45. In this example, the Extra Benefit would increase the Basic Insurance Amount (BIA) of $48,000 by an additional 50%.
At age 40, I picked up a term policy for $500K, 15yrs at a cost of just about $270/yr and dropped FEGLI. This combined with our nest egg, the 50% of salary and monthly FERS survivor benefit should be more than enough.

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TimeRunner
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by TimeRunner » Mon Dec 04, 2017 3:43 pm

Just be aware that FEGLI Open Seasons are rare (2016, 2004, 1999...), so if you did decide to sign up again, you would have to have a medical exam. Probably not an issue since you are currently young and healthy with only parents as beneficiaries, but life changes do happen. See OPM info, currently here: https://www.opm.gov/faqs/QA.aspx?fid=fd ... 8ed4b3f904
One cannot enlighten the unconscious.

UpperNwGuy
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by UpperNwGuy » Mon Dec 04, 2017 4:09 pm

bsteiner wrote:
Mon Dec 04, 2017 2:24 pm
You get to keep 25% of the coverage after you retire at no cost. So if you're sufficiently close to retiring, it can be a good deal.
+1 This is what I did. The premiums stopped at age 65, and I have 25% of the coverage for the rest of my life, free of charge.

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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by ChrisC » Mon Dec 04, 2017 4:09 pm

evilityb wrote:
Mon Dec 04, 2017 1:37 pm
Hello fellow Bogleheads

I have been signed up for the basic life insurance through my employer (Federal Government) since I was hired. I didn't realize I am paying $15 per pay check for this (shame on me for not noticing!) for a total of $390 annually. I am single with no dependents; my parents are financially fine and I'm not interested in being responsible for my siblings financial well being, so, nobody is in dire need of my support. Plus I have a net worth of about $200k that would go to them. I am also a healthy 34 year old.

As far as I can tell, I can sign up for FEGLI insurance again during the open enrollment period or after a qualifying life event.

Is there anything I need to know before cancelling it? Anything I should consider that I haven't thought of?

Thanks!
During my 35 years of Federal service, which ended a few years ago, I went on FEGLI initially when first employed, then went off it for around 20 years, then went back on it for a few years when I thought I might be downsized out of a job and involuntarily retired, then off of it when the downsizing threat subsided (and my last agency offered free life insurance benefits), and I retired without FEGLI but with the term life insurance my agency provided. Despite my on and off ride with FEGLI, the thing I would keep in mind is that you can't go off and on FEGLI during "open enrollment." Unless they've changed the rules, you can only re-enroll in FEGLI during a FEGLI "open season", which happened only twice or thrice during my 35 years of service, 1978-2013. In checking the OPM website, there was another FEGLI open season in September 2016. https://www.opm.gov/healthcare-insuranc ... insurance/. Once you get off FEGLI it might be hard to get back on until another open season. [Note: someone above referenced an OPM link which does state one can re-enroll during open enrollment if you can pass medical underwriting or have a qualifying life event so I stand corrected.]

FEGLI is generally not the best term insurance available to young employees, but if you're close to retirement or have medical issues that make you medically uninsurable, FEGLI is not a bad deal. My BIL was diagnosed with MS shortly after a FEGLI open season and he was fortunate to enroll in FEGLI after being off it for many years -- a few months later he retired. If you go off FEGLI make sure you get a15-20 guaranteed term life insurance policy -- life happens -- you could wind up married and with children a few years from now or get some dreadful ailment.

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evilityb
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by evilityb » Mon Dec 04, 2017 8:43 pm

As always, I can count on the Bogleheads for solid advice.

I didn't realize that FEGLI open seasons were so infrequent. Thank you for pointing that out. I think I'll cancel it and reconsider it later in life when I'm closer to retirement. Fingers crossed I stay healthy until then. In the mean time, I'll look at Term life insurance from another provider, especially if I decide to bring children into my life.
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Nearly A Moose
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by Nearly A Moose » Tue Dec 05, 2017 1:29 am

Canceling it for my wife and replacing it with a much larger amount of private market term insurance for the same price is on our to do list. As others have noted, unless you're uninsurable or close to retirement, FEGLI is a really/weirdly bad deal.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

DrGoogle2017
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by DrGoogle2017 » Tue Dec 05, 2017 1:36 am

It makes sense if you are older but not when you are young. My husband has FEGLI and it pays 1/4 of his final salary when he dies, but it’s free once you pass 65, is no premium any more.

iflyjetzzz
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by iflyjetzzz » Tue Dec 05, 2017 3:30 am

Given your current situation, there is zero reason for you to have life insurance. I haven't had life insurance for more than a decade (other than my company benefit) because if I die, there will be no one who will be in a situation requiring insurance. My net worth is more than enough to cover anything.

Get rid of all life insurance and don't even entertain it until you are at a point in your life where someone else is depending on your paycheck. If you work things right, your net worth will have accumulated enough that you won't need much/any life insurance.

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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by technovelist » Tue Dec 05, 2017 4:48 am

iflyjetzzz wrote:
Tue Dec 05, 2017 3:30 am
Given your current situation, there is zero reason for you to have life insurance. I haven't had life insurance for more than a decade (other than my company benefit) because if I die, there will be no one who will be in a situation requiring insurance. My net worth is more than enough to cover anything.

Get rid of all life insurance and don't even entertain it until you are at a point in your life where someone else is depending on your paycheck. If you work things right, your net worth will have accumulated enough that you won't need much/any life insurance.
I agree that it is a waste of money to buy insurance when you don't have anyone depending on you, and don't expect that to happen within a specified time period in the relative near future.

It's too bad you can't just buy "insurance insurance" that, after initial underwriting, would enable you to buy term insurance within a certain time period without another medical exam before issuance of the term policy. That should actually be reasonably affordable if anyone would issue it, since becoming uninsurable doesn't happen to everyone...
In theory, theory and practice are identical. In practice, they often differ.

iflyjetzzz
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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by iflyjetzzz » Tue Dec 05, 2017 6:52 am

technovelist wrote:
Tue Dec 05, 2017 4:48 am
It's too bad you can't just buy "insurance insurance" that, after initial underwriting, would enable you to buy term insurance within a certain time period without another medical exam before issuance of the term policy. That should actually be reasonably affordable if anyone would issue it, since becoming uninsurable doesn't happen to everyone...
There's a lot of life insurance that doesn't require a physical. Especially under 40.

He would do much better to invest the money than spend it on life insurance right now.

I'm in my late 50s and dropped my life insurance when I calculated that there was no more risk to my wife and children. They will be left with a larger inheritance because of that decision - life insurance gets crazy expensive as we age.

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Re: Any reason to keep my Life Insurance (FEGLI)?

Post by technovelist » Tue Dec 05, 2017 9:52 am

iflyjetzzz wrote:
Tue Dec 05, 2017 6:52 am
technovelist wrote:
Tue Dec 05, 2017 4:48 am
It's too bad you can't just buy "insurance insurance" that, after initial underwriting, would enable you to buy term insurance within a certain time period without another medical exam before issuance of the term policy. That should actually be reasonably affordable if anyone would issue it, since becoming uninsurable doesn't happen to everyone...
There's a lot of life insurance that doesn't require a physical. Especially under 40.

He would do much better to invest the money than spend it on life insurance right now.

I'm in my late 50s and dropped my life insurance when I calculated that there was no more risk to my wife and children. They will be left with a larger inheritance because of that decision - life insurance gets crazy expensive as we age.
Yes, there is a lot of life insurance that doesn't require a physical.

However, it is extremely expensive compared to insurance that does require a physical, because most people who apply for it can't pass a physical.

So long as you have enough in savings to ensure (no pun intended) that your family will be fine without the second Social Security payment that would be lost on your death, then you don't need life insurance any more. Unfortunately, most people would be up the creek in that situation, although I'm sure many if not most of the members of this board would be fine.
In theory, theory and practice are identical. In practice, they often differ.

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