Taking living benefits from the Federal Employees Group Life Insurance (FEGLI) program is something participants hope they won’t have to consider, but taking the time to understand the options could prove beneficial in the event of being diagnosed with a terminal illness. If fate deals such a prognosis, and the life expectancy is nine months or less, both federal annuitants and employees can choose to take their basic coverage as a lump sum payment.
For employees who haven’t retired, however, they can elect a partial amount, meaning the unused portion would still be payable to survivors upon death, and premiums would continue to be deducted from the pension’s survivor benefit. Federal annuitants either under FERS or CSRS can only request the full amount available when electing to take living benefits from FEGLI. If premiums were still being paid in retirement for basic coverage, then these will cease when the lump sum is paid out as well any basic coverage that would’ve been paid to beneficiaries upon death.
You cannot take living benefits from optional coverage – FEGLI A, B, and C. The three options are completely unaffected by taking FEGLI living benefits so long as premiums are still being deducted from either the FERS or CSRS pension. Also of note, the amount one receives is reduced due to lost earnings to the life insurance fund, and the living benefit cannot be taken if the insurance is assigned for a loan. Should the patient outlive their doctor’s timetable for survival, there is no requirement to repay the money received.
Because keeping FEGLI coverage post-retirement can be an expensive choice, be sure to understand your options. Keeping all your FEGLI basic coverage, keeping half, or dropping the life insurance altogether can be smart depending on one’s health and eligibility for a private plan. However, it is important to remember that keeping 25% of FEGLI basic coverage for free is possible. If living benefits are needed down the road, keeping that FEGLI basic insurance at no extra cost can have a big payoff.
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Until Next Time,
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