Office of Personnel Management life insurance is a program that provides life insurance coverage to eligible federal employees, retirees, and their families. Planning for the future requires considering all facets of your life, including financial security. Life insurance is often overlooked but is important for comprehensive financial plans as it can provide funds for dependents after death. Federal employees may be eligible for life insurance through the Office of Personnel Management.
Related: Office of Personnel Management Online Services: What you Need to Know
Types of Coverages provided by Office of Personnel Management Life Insurance
Office of Personnel Management life insurance provides two types of coverage to eligible federal employees and retirees:
Basic life insurance
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Basic life insurance is provided automatically to the employee unless you waive this coverage. It provides a lump sum payment to beneficiaries upon the insured's death. The coverage amount is equal to the greater of your annual rate of basic pay, rounded up to the next $1,000, plus $2,000, or $10,000.
For example, for a $110,000 basic salary, Office of Personnel Management Life Insurance coverage would provide between $112,000 to $224,000, depending on the employee's age. Workers under 35 get double the amount at no extra cost, but that bonus amount is reduced yearly until it's eliminated by age 45. Premium rates are the same for all ages but subsidized, with the government paying a portion for most federal workers.
The US Government pays one-third of the premium for Basic and you pay two-thirds. The U.S. Postal Service pays the entire cost of Basic insurance for its employees. If you are under 45, you automatically have extra coverage without paying any additional premium.
Office of Personnel Management Life Insurance: Optional life insurance
Office of Personnel Management Life Insurance offers additional life insurance beyond basic coverage, called optional life insurance. You have to actively sign up for and pay the premiums for optional coverage yourself. It's not automatic like basic insurance.
According to the Federal Employees' Group Life Insurance handbook, there are three types of optional coverage you can elect:
Option A: Provides an extra $10,000 of coverage for you, the employee.
Option B: Allows you to select coverage from 1 to 5 times your annual salary, rounded up to the next $1,000. This gives you more individual coverage.
Option C: Covers your spouse and eligible dependents, with 1 to 5 multiples of $5,000 for a spouse and $2,500 per child.
Before choosing any optional coverage, you must first have basic life insurance. Optional insurance then gives you extra coverage on top of basic.
The purpose of both basic and optional life insurance is to provide funds to your beneficiaries when you pass away.
The FEGLI Calculator helps you estimate the life insurance amounts and premium costs for different coverage scenarios. You can compare how different combinations of basic and optional coverage would provide different amounts of insurance at different costs, both as an employee and into retirement. This can help you determine the coverage options that best meet your needs and budget.
Related: The Office of Personnel Management Retirement Services Online: What you Need to Know
Accidental Death & Dismemberment Benefits
Office of Personnel Management offers Accidental Death and Dismemberment coverage. AD&D pays a benefit if the employee dies or loses limbs or sight in an accident. Employees fully pay the cost of this optional coverage.
AD&D coverage provides benefits if you die or lose limbs/sight due to an accident. It's automatically included with basic insurance and option A coverage at no extra cost for employees. There are specific requirements to qualify for accidental death or dismemberment benefits. The benefit amounts depend on the type of coverage you have. AD&D coverage does not apply to Options B and C, retirees, or those on workers' compensation.
Waiver of Premium Coverage
Employees may qualify for a Waiver of Premium coverage, which waives life insurance premium costs if they become disabled. This only applies to basic coverage , and employees must meet certain criteria.
Eligibility and enrollment for Office of Personnel Management Life Insurance
Most federal employees are eligible for Office of Personnel Management life insurance, including those in the executive, legislative and judicial branches, postal service workers, uniformed service members, National Fund employees, and TVA workers. To qualify for basic life insurance, you must be retirement eligible, which includes most full-time and part-time workers but excludes some temporary employees.
If eligible, you enroll for optional life insurance by completing form SF 2817 and submitting it to your agency's HR office. You may enroll within 60 days of employment, during subsequent open enrollment periods, or within 60 days of a qualifying life event.
Related: Office of Personnel Management Retirement Login: A Guide you Need to Follow
Changing Your Office of Personnel Management Life Insurance Coverage
You may change the Office of Personnel Management Life Insurance coverage during open enrollment periods or after a qualifying life event. The most common reasons for changing coverage are changes in family status, employment status, or a desire to increase or decrease coverage. If you wish to change, your Office of Personnel Management life insurance coverage must complete an SF 2817 form and submit it to your agency's human resources department.
What Happens to the Office of Personnel Management Life Insurance When You Leave Federal Service?
When the federal employee leaves their job, what happens to their Office of Personnel Management life insurance depends on the type of coverage.
Basic coverage automatically ends for those who don't retire. Retiring staff can continue basic coverage under certain rules. For optional coverage, you have two options. You can change it to an individual policy or keep it as a retiree but for higher premiums based on age and coverage amount.
According to the military benefit association, continuing optional insurance after retiring can be expensive, especially for older people. Costs rise with age and coverage level.
If you are leaving, you should review your insurance options based on your needs. You may want advice from a financial advisor to make an informed choice about continuing coverage.
Advantages of Office of Personnel Management Life Insurance
Affordable Coverage: Basic coverage is free for employees, meaning they do not pay premiums for this coverage. This makes it an affordable option. Optional coverage costs are often lower than private insurance premiums, further enhancing affordability.
Portability: Employees leaving federal service can convert their optional coverage to an individual policy or continue coverage as retirees. This portability allows them to maintain life insurance even after separating from federal employment.
No Medical Exam Required: Employees need not undergo a medical exam to enroll in Office of Personnel Management life insurance. This can benefit those with health issues, which makes qualifying for other types of coverage difficult.
No Discrimination Based on Health Status: Office of Personnel Management life insurance does not discriminate based on pre-existing medical conditions, making it a suitable option for individuals with health issues.
Flexible Coverage Options: Employees can select the level of coverage that meets their unique needs and circumstances, offering flexibility in their options.
Automatic Basic Coverage: Employees are automatically enrolled in basic coverage upon employment, requiring no additional enrollment paperwork. This convenience simplifies the process of obtaining at least some life insurance coverage.
Disadvantages of Office of Personnel Management Life Insurance
Limited Coverage: The level of basic coverage may be insufficient for some employees and families, and optional coverage may be too costly for some.
Limited Flexibility: Once enrolled, employees may be limited to change their coverage, especially those with health issues.
Limited Conversion Options: Employees leaving federal service may face restricted options for converting coverage to individual policies, particularly those with health conditions.
No Cash Value: Office of Personnel Management life insurance policies do not build cash value over time. Employees cannot borrow against the policies or get cash benefits upon termination.
No Choice of Insurer: Employees do not choose the insurer, so they may have restricted the ability to comparison shop for the best rates and coverage.
In conclusion, Office of Personnel Management life insurance provides federal workers and their families affordable premiums, portability into retirement, coverage for those with health issues, flexible options, and easy enrollment for basic coverage.