Every federal employee starts with the same default: FEGLI. But the best life insurance for federal employees isn’t always the coverage you were automatically enrolled in on day one. It depends on your age, your health, how long you plan to stay in federal service, and how much your family actually needs if something happens to you.
This guide walks through how FEGLI compares to private life insurance, what each option actually costs, and which combination fits where you are in your career.
Top 4 Best Life Insurance Options
- Private Term Life Insurance
- Return of Premium Term Life
- Whole and Universal Life Insurance
- Guaranteed Issue Life Insurance
Before we get into those, let’s look at the coverage most federal employees already have by default.
Start With What You Already Have: FEGLI
Most federal employees are automatically enrolled in Basic FEGLI (Federal Employees’ Group Life Insurance) unless they waive it, and many add Option A, Option B, or Option C on top of it. Basic is partially subsidized by the government and requires no medical exam. Option B, the multiple-of-salary coverage most employees rely on for real protection, is priced in five-year age bands, so the premium for the same coverage amount climbs every five years.
If you want the full breakdown of what each FEGLI option covers, exact costs by age, and how coverage changes in retirement, read our full FEGLI Life Insurance guide. The rest of this article focuses on what to compare it against.
The 4 Best Life Insurance Options to Compare Against FEGLI
FEGLI isn’t the only option, and for a lot of federal employees, it isn’t the best one on its own. Here’s how it stacks up against the private alternatives worth considering.
1. Private Term Life Insurance
Term life is the closest match to FEGLI Option B, and it’s usually the first thing worth comparing. You choose a coverage amount and term (10, 20, or 30 years), and your rate stays flat for the entire term instead of increasing every five years.
For healthy applicants, especially those under 45 or 50, term life often costs less than an equivalent amount of FEGLI Option B, and it doesn’t disappear if you leave federal service. For most federal employees who need straightforward income replacement for their family, this is the best life insurance option to weigh against FEGLI.
❤️🩹 Term life only solves half the income protection problem. It doesn’t help if you’re sidelined by an illness or injury and still very much alive. Pairing it with short-term disability coverage covers the gap term life was never designed to fill.
2. Return of Premium Term Life
A less common variation on term life: if you outlive the policy term, you get every premium dollar back. It costs more than standard term coverage, but it functions as both protection and a forced savings plan. Worth a look for federal employees who like the idea of coverage that isn’t just an expense if nothing ever happens.
3. Whole and Universal Life Insurance
These are permanent policies that last your entire life and build cash value you can borrow against. They cost significantly more than term coverage, so they’re not usually the first option for someone comparing basic income protection. They’re better suited for estate planning, guaranteed inheritances, or final expenses, none of which FEGLI or term life insurance are designed to cover.
4. Guaranteed Issue Life Insurance
Not everyone can qualify for the options above. Guaranteed issue policies skip the medical exam entirely, making them a fallback for people who can’t pass standard underwriting. Coverage amounts are modest, usually enough for final expenses rather than full income replacement, and they cost more per dollar of coverage than underwritten policies. However, there are options for up to $100,000 of coverage. If a health issue keeps you from qualifying for private term coverage, FEGLI’s guaranteed-issue nature at initial enrollment may already be your best option, which is one more reason not to waive it without a backup plan in place.
☎️ Not sure which of these actually makes sense for your age, salary, and retirement goals? Schedule a free 30-minute call with David to walk through the numbers before you add, drop, or replace anything.
How Much Does Private Life Insurance Actually Cost?
Rates vary depending on your age, health, and coverage amount, but here’s a general sense of what a healthy, nonsmoking applicant might pay for a 20-year term policy:
- $100,000 policy: roughly $16 to $19 a month at age 40
- $300,000 policy: roughly $28 to $38 a month at age 40
- $500,000 policy: roughly $47 to $59 a month at age 40
At younger ages, these numbers drop further, often well below what an equivalent amount of FEGLI Option B costs someone in their 40s or 50s. That gap is why many federal employees buy private term coverage early, locking in a low rate for decades instead of relying on Option B through their entire career.
Which Option Is Actually Best for You?
New to federal service and healthy: Keep Basic FEGLI for the subsidy, and lock in a private term policy today before your rate climbs over the next 20 to 30 years.
Mid-career with a mortgage or dependents: Compare your current Option B cost against a private term policy sized to your actual financial obligations. Many employees find they can get more coverage for less by shifting to a private term policy.
Within five years of retirement: Before changing anything, confirm what carrying FEGLI into retirement would actually look like. The eligibility and reduction rules are strict, and even a small gap can disqualify you, so it’s worth reviewing with someone who knows the rules before finalizing retirement paperwork.
Managing a health condition: If a health issue makes private underwriting difficult, FEGLI’s no-exam enrollment or a guaranteed issue policy may be your most realistic option for keeping or adding coverage.
Choosing Your Coverage
There is no single best life insurance option for every federal employee, but there is a best combination for your specific situation, and it usually involves keeping some FEGLI while filling the gaps with a private policy. The only way to know for sure is to compare real numbers side by side.
Get a FEGLI Alternative Life Insurance Quote and compare it against your current FEGLI premiums before you decide what to keep, drop, or add.
Frequently Asked Questions
Still have questions? Here are quick answers to the most common questions federal employees have about life insurance costs and options.
How much is a $100,000 life insurance policy a month?
For a healthy, nonsmoking 40-year-old, a 20-year term policy with $100,000 in coverage typically runs about $16 to $19 a month. Younger, healthier applicants usually pay less.
How much is a $300,000 life insurance policy a month?
A healthy 40-year-old can generally expect a 20-year term policy with $300,000 in coverage to cost around $28 to $38 a month, though the exact rate depends on age and health.
What is a monthly payment for $500,000 life insurance?
For a healthy, nonsmoking 40-year-old, a 20-year term policy with $500,000 in coverage typically costs about $47 to $59 a month.
What disqualifies a person from life insurance?
Very few conditions disqualify someone outright. Most health issues just affect your rate rather than block coverage entirely. Outright disqualification is rare, and is usually limited to specific terminal diagnoses, active substance abuse, or dishonesty on the application. Federal employees who don’t qualify for standard private coverage still have options, including FEGLI (no medical exam required) and guaranteed issue policies.
Can I sell my federal employee life insurance?
No. FEGLI is group term insurance with no cash value, so there’s nothing to sell. Only certain permanent private policies with cash value can be sold through a life settlement, which is a different product entirely from FEGLI.
What does Dave Ramsey say about voluntary life insurance?
Dave Ramsey generally advises against relying on voluntary group life insurance through an employer as your only coverage. His guidance is to buy an independent term life policy, typically 10 to 12 times your income, so coverage isn’t tied to your job and won’t disappear if you leave it. He’s also a longtime critic of whole life and other cash-value policies sold as voluntary benefits, favoring low-cost term coverage instead.
What are the 4 types of life insurance?
The four main types are term life (temporary coverage for a set period, the most affordable per dollar of coverage), whole life (permanent coverage with a level premium and cash value), universal life (permanent coverage with flexible premiums and cash value), and guaranteed issue life (small, no-exam policies for people who don’t qualify elsewhere).