FEGLI, Gesundheit, and Your Life Insurance Needs Assessment Test
Yesterday’s Fed Nav blog post, FEGLI, Not Just Another Pasta Course talked about how devastating it can be to choose the wrong Federal Employee Group Life Insurance plan. Before you make any decisions about what FEGLI option is right for you, taking a self-assessment needs test can help you choose the plan that meets your needs both now and in the future.
1. Do you need additional life insurance?
There are some long-term Federal Employees who have never been married and have no children, disabled siblings, or elderly parents who will be financially impacted by their unexpected death. In this case, the Basic Coverage the FEGLI program provides as a part of the Federal Employee Benefits package may be sufficient to cover the funeral expenses, final medical costs, and any lingering household bills that show up before someone has had a chance to turn off the cable.
In most cases, however, Federal Employees have loved ones they need to protect from the financial disaster that can come with the loss of a paycheck. Life insurance certainly isn’t a lottery ticket, but it is still important protection for your family against the sudden loss of an income stream.
The Thrift Savings Plan is a great vehicle for Federal Employees to build a retirement nest egg. But if you die before having a chance to completely feather your nest, with kids still in school and quite a few years left on the mortgage, you will need an appropriate life insurance plan to adequately protect your family.
2. How much life insurance do you need?
Often, Federal Employees seem to purchase random amounts of life insurance, rather than doing their due research to find out how much their family will really need in their absence. The best way to start is by listing anyone who would be financially impacted by the loss of income due to your death, and determining how much they would need in your absence. Some expenses will have to be estimated, such as the rising cost of college education for young children, or retirement for a current stay-at-home parent. Other expenses are more predictable, such as your mortgage payment and monthly bills.
3. How long do you need your life insurance?
Many people believe they will only need to get one life insurance policy during their lives, but this is often not the case. Instead, a series of overlapping policies with varying amounts and terms may be the most effective life insurance strategy.
It’s important to remember that life insurance is really income replacement insurance for our loved ones. Each family’s financial obligations that life insurance will need to cover vary in duration and in amount. For example, the life insurance coverage required for a family with young children will be very different than a non-working spouse with an empty nest.
Of course, there are other factors to consider before purchasing a life insurance policy, including your TSP, home equity, mortgage balance, and any other life insurance policies or sources of income your family will have after your death. After examining all this information, your life insurance needs can be more accurately identified.
4. What can you afford?
After taking the life insurance self-assessment test, you will need to determine what you can actually afford. If you can’t afford the complete umbrella of coverage you need right now, a cost/benefit analysis is necessary to determine what your most immediate needs are.
Life insurance is not a separate item from your overall financial plan, but rather an integral part of the whole which varies immensely from person to person depending on individual circumstances. So before purchasing life insurance, take time to analyze your needs and priorities, and determine what is most important to you and your family.
Want to learn more about FEGLI? Download our free resource, The Good, The Bad, And The Fegli