The Federal Government is this country’s largest (non-private) employer. There are millions and millions of full-time and half that again for part-time workers. These people include our men and women in the armed forces, postal employees, IRS workers, politicians, retirees from all these organizations, etc.
Federal employees automatically get basic life insurance, which is self-insured by the Government and called FEDERAL EMPLOYEES GROUP LIFE INSURANCE (FEGLI). This basic coverage is typically a minimal amount, often equal to one year’s annual pay. Federal employees also have the option, at times, to obtain more insurance referred to as “optional” Insurance. This optional insurance comes in multiples of the Basic amount and employees have the ability to choose how many multiples, up to 5, of their salary they wish to be insured for at the low group rates.
When someone separates or retires from service, they are given 31 days to decide if they want to take their life insurance with them or not. By taking control of your own life insurance coverage and planning ahead, you gain future options that won’t otherwise exist. One example is that IF you should get seriously ill, you will have options to convert that policy to cash by way of a viatical settlement.
It’s most important that you understand what to do in order to maximize your benefit. I am typically able to ascertain during an initial phone call, what steps need to be taken to derive the most beneficial options going forward.*
The first thing to understand is that the way the FEGLI Rules are written, it can be beneficial to split the life insurance coverage up as they have – into basic and optional. The rules are clear: An employee, as I mentioned earlier, will be given paperwork explaining that they have 31 days to choose to either leave their life insurance with FEGLI and keep the premiums at the lower group rate, or, to convert it out to a new policy, resulting in full control of the policy and higher, individual insurance premiums. Both have their benefits, as does a hybrid of the two and whatever you choose should be best for your individual situation and what you anticipate it to be going forward.
A list of insurance companies to which you can convert your insurance without evidence of insurability should be in your retirement package. An experienced settlement specialist (not a life insurance agent), can advise you of several “settlement friendly” companies to convert all or part of your coverage to.
***THIS IS THE TIME TO CALL A SETTLEMENT SPECIALIST ***
*** BEFORE you complete the paperwork*** BEFORE or DURING the 31 day period***
There are different ways to manipulate these policies and it is not “one size fits all.” With FEGLI, as with most other large group employee insurance plans, there is a very specific time frame to work within. There may be multiple options available to you, each with its’ own ramifications. To maximize your benefits you must understand your options.
In the case of a viatical settlement, a licensed viatical settlement broker will advise and help you maneuver through the complex settlement process. It’s imperative to understand that FEGLI policies offer a special living benefit on the basic only. So do you convert all or part of your insurance? Or none at all? That all depends on your overall situation and goals. Those of you going out on Disability now, please call us first so we can explain. Be cognizant of this or you might lost some of your rights.
More specifically, FEGLI offers a living benefit when someone is given a prognosis of “no more than 9 months”. However, they do not offer any type of living benefit on the optional coverage. This is why you will want to convert the optional coverage to an individual, permanent insurance policy which then can be viaticated. By taking control, the insured will now be able to take advantage of both the Living Benefit on the basic coverage, which pays approximately 95% of the face amount of that basic coverage, and then viaticate the optional, now individual policy. By doing both, what I call a hybrid, you can access more money when you need it most, than either individual option will offer.
Although selling a life insurance policy is not right for everyone, I strongly believe in having and maintaining as many different options as you may have – just in case. That way, when it’s time for you to do something with it, you can choose which is most beneficial for you and your family. The more options you have, the more choices shall follow.
And be sure to call an experienced life and viatical settlement specialist who understands and has experience with FEGLI policies and how to use them to your advantage!
*Call us for a free phone consultation. We will discuss your specific situation and what immediate steps you should take. We will also assist you in understand how to move forward – by empowering you with information! Carole Fiedler can be reached at 800-905-0114
