FEGLI vs. private term life: which costs less?

Why the two are priced differently

FEGLI Option B is age-banded term insurance. Your rate is set by your age band, and it steps up on the first pay period after you enter a new band, every five years, for as long as you carry it. Nothing you do locks it in.

A private term policy is the opposite. You pass underwriting once, and the premium is fixed for the whole term, 20 or 30 years. You pay more than Option B at the start and less, often far less, at the end.

That single difference decides almost every FEGLI-versus-term question. The rest is your health and how long you need the money to be there.

$500,000 side by side

Take a federal employee earning $100,000. Five multiples of Option B gives $500,000 of cover. Here is what that costs through the age bands, against what a 20-year term policy of the same size costs someone who bought it at 40 and kept it.

The FEGLI column is exact: it is OPM's published employee rate multiplied by the coverage. The term column is a range, because your premium depends on the health class you are offered. The low end is what a healthy 40-year-old non-smoker in a preferred class was quoted in 2026; the high end is closer to the market average across health classes.

The 20-year bill

Price per month is the wrong lens. What matters is what you hand over across the years you need the cover.

Even at the expensive end of the term range, the fed who bought a policy at 40 pays around ten thousand dollars less over the same twenty years, for the same death benefit. The gap comes almost entirely from the last five years, when Option B costs $195 a month and the term policy still costs what it did at 40.

When FEGLI still wins

• Your health would fail underwriting. This is the big one. Option B in your first 60 days needs no exam and asks no medical questions. A private carrier will price a heart condition, cancer history, diabetes or a mental health diagnosis into the premium, or decline you outright.
• You are young and want cover today. Under 35 the Option B rate is 2 cents per $1,000 biweekly. On $500,000 that is about $22 a month, competitive with term and available without a medical.
• Your need is short. If the mortgage is nearly paid and the youngest is close to leaving school, paying a higher rate for a few years beats underwriting a 20-year policy you will not keep.
• You want nothing to administer. Option B comes out of pay automatically and follows your salary upward without a new application.

What happens at 65

Option B does not simply continue in retirement at the same price. You elect one of two paths:

• Full reduction: from the month after you turn 65, the coverage drops by 2% a month until it is gone, and you pay nothing.
• No reduction: the coverage stays, and you keep paying the age-banded premium, which is $0.48 per $1,000 biweekly at 65 to 69 and $2.88 by 80. On $500,000 that is $520 a month at 65 and more than $3,100 a month at 80.

A 30-year term policy bought at 45 covers you to 75 at one fixed price. That is the comparison worth running if you expect anyone to still depend on your income past 65.

How to switch without a gap

• Get quotes and complete underwriting first. Do not touch your FEGLI election until the new policy is issued, paid and in force.
• Match the term length to the years the money is needed, not to a round number. Count to the mortgage payoff, or to your youngest finishing school.
• Check the carrier's financial strength rating and its NAIC complaint index, not just the premium.
• Once the policy is in force, reduce or cancel Option B with form SF 2817 through your HR office.
• Consider keeping Basic. It is a flat 16 cents per $1,000 biweekly at every age, your agency pays a third of it, and at 65 you can elect the 75% reduction, which makes it free.

Common questions