Federal Employee Benefits – The Life Insurance Coverage

September 23, 2015

us-postal-service

If you are a federal employee, it is important to understand your benefits package to ensure that your income is adequately protected in the event that something should happen to you.

The U.S. government does a very good job of compensating those who work for the federal government. However, as with other employee benefit plans at some of the private sector businesses, the benefits available to employees do not adequately cover the family in time of need. That is why it is important to review the benefits packages and determine if there is a need for more coverage.

For instance, closely examining the FEGLI (Federal Employees Guaranteed Life Insurance) program, there are four major areas where the benefits are deficient.

1. The FEGLI program is a term insurance program only. There is no cash value available to the employee to borrow against for emergency needs. Term insurance is pure insurance in which a death benefit is available to the family in the event of death to the breadwinner. There is no cash value which accumulates in the policy.

2. Under the FEGLI program, the life insurance only covers the employee and his family only during the time that the employee is employed for the federal government or the face amount will reduce tremendously upon retirement.

Term insurance covers the family in the event of death of the breadwinner, but only during a specified period of time. Generally, the policy will cover the family for 10, 15, 20, 25, or 30 years, depending on which insurance company the family elects to sell them a life insurance policy. An insurance agent will recommend term insurance to cover short term needs, such as a mortgage which will be paid over a 30 year period.

3. Federal employees will find that their premiums for their life insurance will increase with age and salary increases, but the coverage decreases. This is called increasing premium term insurance, which becomes very expensive in later years, when there is more of a need for life insurance.

4. In the event that the employee becomes disabled, he/she may not be able to continue paying for life insurance, since the employee is not collecting wages.

I cam across this comment on a blog paost which illustrates why federal employees need a periodic review of their policies:

“My mother worked for the Federal government for over 30 years and had the FEGLI plan and passed away and my sister and I will be splitting a little over 5,000 dollars. When my father (mom was divorced) passed his insurance was with the state and my brother and I split over 50,000 dollars. What’s wrong with this picture?? Our government is so screwed up and you know that all those senators, etc. won’t have that cheap of insurance and we are paying for it. My mom worked hard those 30 years and sure didn’t get all the perks and paid vacations.” madashe*l, from Life Insurance: “The Good, the Bad, and the Ugly.”

These are problems which the employee must resolve in order for the family to be financially protected in the event of his/her death. Boston Mutual offers solutions to these problems with products which are specifically designed to meet the needs of federal state, municipal, and postal workers. For a free booklet explaining your options, please use the contact form to request the FREE brochure,

    Legacy Life Select: Permanent Life Insurance for Federal, State, Municipal, and Postal Workers.

Please copy and paste the title into the contact form.


Life Insurance on a Tight Budget

September 20, 2013

 

Slide3

 

If you have been reading my postings on my fan page or my my blog, you may have drawn a conclusion that you need to purchase life insurance.

The reason we purchase life insurance is to protect one’s income.  Generally, we need to decide how much money the family is going to need upon our death.  The first thing to do is to make a list of all debts that you have now.  Then compute the dollar amount of your salary times the number of years you would like to provide for the family.  Add a percentage each year for inflation, as the cost of living increases every year.

For example, John and Mary have $50,000 in credit card debt and an outstanding mortgage of $250,000.  John earns $50,000 per year and they decide to include 5% for inflation per year.  Mary would like an income for at least three years after John’s death.

Most families would elect to cover, at least, the mortgage with life insurance so that the family would not lose the home.  The spouse could elect to use the life insurance proceeds to pay off the mortgage upon death of the other spouse. 

Ideally, both spouses should purchase an amount of life insurance on themselves to cover the mortgage, since both make contributions from their salaries to pay the mortgage.  A life insurance agent can assist in helping the couple to determine the amount of cover they can purchase, based on their budget.

The most economical insurance policy would be term insurance which provides a death benefit without cash value.  The most advantageous policy would cover them for ten, twenty, or thirty years at a level death benefit.  The spouses would name each other as beneficiaries on each other’s policy.  In this way, each would collect the proceeds of the policy, if the other dies.

Younger couples would be able to purchase this amount of coverage very inexpensively.  However, older couples would have to pay more money, especially if they have health problems.  Therefore, they may have to elect lower levels of coverage.  However, a lower amount of insurance is better than none at all.  Couples should purchase as much insurance as their budgets will allow.

In conclusion, couples should make plans for their financial security for the family in the event of the untimely death of one or both of the spouses.