FEGLI Option B Is Getting Expensive. Here Is How to Decide What to Do About It

A federal employee reviewing benefits paperwork at a home desk under warm lamplight in the evening

Key takeaways

FEGLI Option B is priced in five year age bands that step up at 35, 40, 45, 50, 55, 60 and 65. That is the election worth revisiting.
On the same $400,000 of coverage, Option B can run roughly $24 biweekly in your late forties and around $160 biweekly in your early sixties.
There is a five year lookback. To carry any FEGLI coverage into retirement you must have held it for your last five years of federal service, and open seasons are rare. This is a decision for your early fifties, not the year you retire.
Basic is a different matter and is generally fine as it stands. It does not age rate, and the government pays a third of it.
FEGLI requires no medical underwriting. Private term does. That single difference is why the right answer is not the same for everyone.
To be plain about our role: Capitol Benefits does not sell FEGLI and earns nothing from it. What we do is run the comparison and tell you which is better for your situation, including when that means changing nothing.

We work with a lot of households in Maryland, DC and Northern Virginia where at least one person is a current or former federal employee. The same question comes up over and over, usually around age fifty, and usually right after a payroll deduction jumps.

The question is some version of: am I paying too much for this, and should I be doing something else instead?

It deserves a real answer rather than a sales pitch, so here is how the math actually works.

What you are actually enrolled in

FEGLI is not one thing. It is four, and they behave very differently.

Coverage	Amount	Who pays	Does the price rise with age
Basic	Salary rounded up to the next $1,000, plus $2,000	Government pays one third, you pay two thirds	No. Flat $0.15 per $1,000 biweekly
Option A	$10,000	You pay all of it	Yes, in age bands
Option B	1x to 5x your salary	You pay all of it	Yes, and steeply
Option C	Family. $5,000 per unit for a spouse, $2,500 per unit for a child, 1 to 5 units	You pay all of it	Yes, in age bands

Read the right hand column again, because that is the whole story. Basic is age neutral and partly employer funded. Everything else is age rated and entirely yours.

Why Option B gets painful

Option B is priced in five year age bands, and the price per $1,000 of coverage steps up at 35, 40, 45, 50, 55, 60 and 65. The early steps are mild. The later ones are not.

Take an employee earning $80,000 who elected 5x salary, so $400,000 of Option B coverage. In the 45 to 49 band that costs roughly $24 every two weeks. By the 55 to 59 band it is around $72. In the 60 to 64 band it is approximately $160.

Same coverage. Same person. Roughly seven times the cost across fifteen years, and the steepest part of the curve arrives exactly when people are trying to finalise their retirement budget.

This is not a flaw in FEGLI. It is what group term insurance does when it is priced by current age with no long term rate lock. But it does mean that a decision made at 35 and never revisited becomes an expensive default at 60.

The trap that catches people, and it is a timing trap

Here is the part that is genuinely easy to get wrong, and it is the reason we would rather you read this at 50 than at 62.

To carry any FEGLI coverage into retirement, you must have held that coverage for your last five years of federal service.

So the obvious money saving move, dropping Option B in your late fifties because the premium has become uncomfortable, quietly forecloses the option of taking it into retirement. And you cannot simply re-elect it later. Outside of a qualifying life event, increasing FEGLI coverage requires an open season, and those are genuinely rare. There was one in 2004 and one in 2016. Nobody can tell you when the next one will be.

That combination, an expensive premium curve plus a five year lookback plus no reliable way back in, is why this is a decision with a deadline that nobody sends you a reminder about.

Where private term insurance genuinely wins

For a healthy person in their forties or early fifties, a level premium term policy will often cost meaningfully less than Option B for the same death benefit, and the rate is locked for the whole term rather than stepping up every five years. That is the honest case for looking outside FEGLI.

A twenty year level term policy bought at 50 holds its rate to 70. Option B over the same period passes through the 55, 60 and 65 bands. The gap compounds.

Where FEGLI genuinely wins, and we are not going to pretend otherwise

Private term requires medical underwriting. FEGLI, for coverage you already hold, does not.

If you have a health history that makes underwriting difficult, a diabetes diagnosis, a cardiac event, a cancer history, a recent significant change in health, then the coverage you already have inside FEGLI may be the best coverage available to you at any price. In that situation the expensive premium is buying something a private carrier will not sell you.

There is also a category where FEGLI is simply the right answer regardless: Basic. It is partly employer funded, it does not age rate, and the employee cost is modest. We rarely see a good reason to drop it.

Anyone who tells you FEGLI is a bad deal across the board is not doing arithmetic. They are selling.

How to work out your own answer

Find your current FEGLI elections and what each one costs you per pay period. Most people know the total deduction and not the split, and the split is the whole point.
Note your age band and the next one. If you are 53, the 55 band is the number that matters, not today.
Get underwritten quotes for level term at the coverage you actually need, before you change anything. A quote costs nothing and tells you whether the private option is even open to you.
Check how far you are from retirement against the five year rule. If you are within five years, dropping coverage is close to irreversible.
Decide on Basic and the options separately. They are different products with different economics and lumping them together is how people end up either overpaying or underinsured.

One rule we will not bend on

Do not cancel FEGLI coverage until a replacement policy is issued and in force. Not applied for. Not approved pending. Issued and in force, with the first premium paid.

Underwriting can come back rated or declined for reasons nobody anticipated, and a gap between dropping one policy and starting another is the kind of mistake that cannot be undone. Any advisor who lets a client cancel first is being careless with something that matters.

If you want someone to run the comparison honestly, including the outcome where you keep what you have, that is a conversation we are glad to have. We are based in Gaithersburg and this is a common enough question in the DMV that we have had it many times.

Frequently Asked Questions

How much life insurance does FEGLI Basic actually provide?
Your annual salary rounded up to the next $1,000, plus an additional $2,000. The federal government pays one third of the premium and you pay two thirds, and the employee share is a flat $0.15 per $1,000 of coverage every two weeks regardless of your age.

Why do FEGLI Option B premiums rise so sharply?
Option B is priced in five year age bands, with the cost per $1,000 of coverage stepping up at ages 35, 40, 45, 50, 55, 60 and 65. On $400,000 of coverage the premium can move from roughly $24 biweekly in the 45 to 49 band to around $160 biweekly in the 60 to 64 band.

When is the next FEGLI open season?
Nobody knows. Open seasons are rare rather than annual. There was one in 2004 and one in 2016. Outside of an open season you generally can only add or increase coverage after a qualifying life event, which is why dropping coverage should not be treated as easily reversible.

Can I keep FEGLI Option B after I retire?
Only if you have held that coverage for your last five years of federal service. This is the rule that makes the decision time sensitive. If you drop Option B at 58 and retire at 62, you cannot carry it into retirement even if you change your mind.

Is private term life insurance always cheaper than FEGLI?
No. For a healthy person in their forties or early fifties, level premium term is often less expensive than Option B for the same death benefit and holds its rate for the full term. But private coverage requires medical underwriting, so for someone with a significant health history the FEGLI coverage they already hold may be better than anything available on the open market.

Should I cancel FEGLI before buying a private policy?
No. Never cancel existing coverage until the replacement policy has been issued and is in force with the first premium paid. Underwriting can come back rated or declined, and a gap in coverage is not a mistake you can correct after the fact.