The reason Life Insurance through your job can be expensive if you’re healthy is because Life Insurance through your job is a policy where anybody that works for the company or organization can get the coverage without any medical questions being asked. You can currently have cancer, diabetes, vastly overweight, multiple heart surgeries or even diagnosed with HIV. Anything that is looked at by most carriers as a red flag and will cause a decline but Life Insurance through your employer it’s okay. So, if you suffer from any of these ailments mentioned then your Life Insurance through your job is perfect for you because you wouldn’t be able to get coverage elsewhere. However, if you are a person that runs a marathon, works out everyday, eating well and have no health issues you will be paying the same premium as someone that does suffer from one of those ailments. You then have to ask yourself if that is the case how much are you paying for their risk? Because insurance company creates price based on the risk of the group and you end up paying the price for them. On the other hand, if you go out and get your own policy for example with the preferred rating you will be able to pay half the cost of what you are getting or pay the same amount and get double the coverage. This is one way in which your Insurance through your job can affect the healthy individual.
When you start a new job, Life Insurance through your job is fairly easy to sign up for. You can get it as long as your employer offers it, but you have a particular window to sign up. You can’t wait two months to sign up for Life Insurance through your job; there is usually a 30-day window. The reason for this is Life Insurance through your job does not require medical exams or health screening, so they only give you that window. This is to ensure that people do not wait until they are diagnosed with some illness to sign up. Insurance companies have to prevent this by giving a window to sign up, and once that window is closed, you do not have another option to do the coverage unless you do a medical exam. So basically the only way to opt into Life Insurance through your job is when you begin a job.
Life Insurance through your job can be very beneficial for you if you don’t have the best of health. Reasons for this is because in many cases if you have for example terminal cancer, suffered a heart attack, had cancer last year, COPD and diabetes with insulin if you go to get any coverage, it is going to be very expensive for you. You will only be able to get limited amounts based on what that insurance company gives you coverage for. So, if you start a job that has Group Term, you have a window to sign up for that term, and during that window, you don’t have to answer any medical questions, and you will be able to get that coverage right away. Life Insurance through your job benefits persons who have bad health. I had a client who was recently diagnosed with cancer, she got a new job, and she was able to get coverage without any problems. She, however, was not able to get much coverage through me, because of her recent diagnosis and most insurance companies would want her to be a couple of years removed from cancer to get a degree of coverage. In this situation, it benefited the client to go with her Insurance through her job because it allows for her to get more coverage than she would have gotten with an individual policy. She is aware though that this Insurance through her job will not last her entire life; however, it is considered to be golden for her family because she got more coverage than she would have received with any other insurance policy option.
Life insurance through your job as long as your beneficiaries are set up properly will pay out immediately. Once your family sends the insurance company the death certificate they will send the money; there is no waiting period. There are some policies where you have to be alive for one year, two years or three years and in some case, four years before the policy will pay out in its totality. With a Life Insurance coverage through your job there is no waiting period in most cases, there maybe one or two out there but I am not aware of any. Life Insurance policy through your job is designed to pay out the full death benefit once the person that the policy is designated for passes away. Hence you don’t have to worry about that waiting period as it pays out right away in the full amount.
Life Insurance through your job does not have any cash value. The reason it does not have any cash value is that it is a term policy designed to be as cheap as possible to give you the most amount of coverage during that period. No term policy has cash value only whole life, and universal life policies have cash values. Once you stop paying the premium on your Life Insurance through your job that will be it. There are no cash values to back it up. This is what keeps the cost low because there is no cash value, no bells or whistles it is just a straight policy you have while working that is only beneficial to your family if you die within the period of employment.
FEGLI stands for the Federal Employee Group Life Insurance plan. FEGLI is a group policy meaning that in order to be insured by it, you must be a member of the group. The group in this occasion is a federal employee. Because it’s a group policy there are no medical requirements as long as a person elects coverage when they are first starting their service with the government.
What is FEGLI and What it does and Mean to you?
There are 4 different accounts available with the FEGLI.
However, for the purposes of this article we will focus on one account the Basic.
When you start in the Government you have the basic coverage by default This coverage changes throughout your time as a FED. When you’re between the ages of 18-35 2x your salary rounded up to the nearest $1000 and an additional $2000. After the age of 35 your additional coverage decreases annually until you reach 45 which then you only have your salary rounded to nearest $1000 and then the additional $2000 and this formula stays the same until you retire.
So for example 33 year old making $100,500 would have a basic FEGLI amount of $ 203,000
A 45 year old making $ 100,500 would have a basic FEGLI amount of $103,000
Basic in retirement: In retirement you have 4 different options
Free= 75% reduction. In this case after 65 your coverage will began to drop to 75% of your last salary.
Example: An employee making $100,000 at retirement age will have a policy of $25,000 after the deductions are finished.
Your are also able to get a No deduction, or a 50% deduction. These deductions cost you to keep them. You can explore these options. They are very valuable to those individuals that have health concerns that would prevent them from getting anything outside the government. Otherwise it makes more sense to get your own private coverage because the cost are much less.
Basic FEGLI is excellent for younger people with young children and a home with health issues. It is not so excellent for younger people with excellent health just because coverage can be gotten at a much better rate on the private market.
To learn more about how to get started, take our five-minute FEGLI quiz.