Understanding FEGLI

Welcome to the official Trief & Olk blog, where we delve into the intricacies of life insurance to empower you with knowledge and understanding. In today’s post, we’re explaining one of the most significant life insurance programs available to federal employees: the Federal Employees’ Group Life Insurance (FEGLI).

Whether you’re a federal employee seeking to understand your coverage options or a FEGLI beneficiary grappling with the aftermath of a loved one’s passing and a claim denial, our goal is to provide you with the knowledge and guidance you need to navigate the FEGLI landscape with confidence.

What is FEGLI?

FEGLI is a group term life insurance program administered by the Office of Personnel Management (OPM) for most federal employees. It provides basic life insurance coverage, as well as options for additional coverage, such as Accidental Death and Dismemberment (AD&D) insurance.

Eligibility for FEGLI

Federal employees are generally eligible for FEGLI coverage and are enrolled automatically as soon as you hit pay and duty status for your position.

Who Can Be a FEGLI Beneficiary?

FEGLI allows federal employees to designate beneficiaries to receive the death benefit in the event of
their passing. Beneficiaries can include spouses, children, relatives, or any other individuals or entities chosen by the policyholder. It’s essential to regularly review and update beneficiary designations to ensure they reflect your current wishes.

If you don’t select a FEGLI beneficiary, benefits are awarded in a specific order — first spouse, then children, then parents, and so on.

Benefits of FEGLI

The Federal Employees’ Group Life Insurance (FEGLI) program provides several advantages, making it an appealing choice for federal employees looking for affordable life insurance options. First and foremost, FEGLI is known for its affordability. It offers competitive premiums, which are especially favorable for younger and healthier individuals. This makes it a cost-effective solution for those seeking life insurance coverage.

Another significant benefit of FEGLI is the absence of medical underwriting. Unlike many individual life insurance policies that require medical checks, FEGLI does not demand medical underwriting for most employees. This often means that coverage is guaranteed, irrespective of one’s health status, which can be a substantial relief for those with pre-existing conditions or who might otherwise be deemed uninsurable.

FEGLI also offers portability. Coverage can be continued into retirement, providing ongoing security. Moreover, it allows for the conversion of group coverage to an individual policy without the need for evidence of insurability, which can be particularly valuable as circumstances change over time.

Lastly, the convenience factor of FEGLI cannot be overlooked. As a group insurance program, it simplifies the enrollment and management process for federal employees. Premiums are automatically deducted from payroll, making it an effortless part of employee benefits administration.

Drawbacks of FEGLI

The Federal Employees’ Group Life Insurance (FEGLI) program is a key component in providing financial security for federal employees and their families. While it brings several advantages such as affordability and portability, there are significant limitations to consider.

Firstly, the coverage options under FEGLI, although inclusive of basic and optional levels, are not as extensive or adaptable as those offered by private life insurance policies. This can be a considerable drawback for those seeking more tailored insurance solutions.

Secondly, the cost of FEGLI can escalate with age, especially concerning optional coverages like Option B, which offers additional multiples of coverage based on salary. What starts as a reasonable premium can become a substantial financial burden over time.

Another limitation is the lack of flexibility. FEGLI coverage is closely tied to federal employment, and leaving or retiring from federal service might lead to a loss of coverage, unless it is converted to an individual policy. This dependency can be restrictive for those who change jobs or retire early.

Additionally, there are potential tax implications. In certain situations, the death benefit from FEGLI may be subject to federal income taxes, particularly if it surpasses specific thresholds.

Given these drawbacks, it’s crucial for federal employees to carefully assess their personal insurance needs and circumstances. FEGLI may serve as a fundamental protection layer, but in many cases, additional or alternative coverage options might be more appropriate. Consulting with a qualified insurance professional is advisable to make well-informed decisions that align with long-term financial planning goals.

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Why a FEGLI Beneficiary Claim may be Denied

Failure to Meet Eligibility Criteria

One of the primary reasons for FEGLI beneficiary benefit denials is the failure to meet the eligibility criteria outlined in the policy. This could include situations where the designated beneficiary does not qualify under the terms of the policy, such as individuals who are not legally recognized dependents or who do not meet the relationship requirements specified by FEGLI.

Disputes Over Beneficiary Designations

Beneficiary designation disputes often arise when there are conflicting or unclear instructions regarding who is entitled to receive the death benefit. This can occur in cases of divorce, remarriage, or changes in familial relationships where the designated beneficiary may no longer be considered eligible under FEGLI guidelines. Without clear and up-to-date beneficiary designations, disputes can arise, leading to delays or denials of benefits.

Exclusions and Limitations

FEGLI policies may contain exclusions or limitations that restrict coverage under certain circumstances. For example, benefits may be denied if the insured’s death resulted from a cause excluded from coverage, such as suicide within a specified period after policy issuance. It’s crucial for beneficiaries to carefully review the policy terms and conditions to understand any exclusions or limitations that may apply.

Failure to Provide Required Documentation

A FEGLI beneficiary may encounter challenges in receiving their benefits if they fail to provide the necessary documentation to support their claim. This could include death certificates, proof of relationship to the insured, and other documentation required by the insurance company to process the claim efficiently. Failure to submit the required documentation in a timely manner can result in delays or denials of benefits.

Legal Recourse for Denied FEGLI Benefits

If a FEGLI beneficiary’s benefits are denied, it’s essential to seek legal guidance from an experienced life insurance attorney — like those at Trief & Olk — who can assess the circumstances of the denial and explore potential legal recourse. Depending on the specific reasons for the denial, a FEGLI beneficiary may have grounds to challenge the decision and pursue the benefits they are entitled to through negotiation, arbitration, or litigation.

Life Insurance Denial Statistics

20%

The annual average number of life insurance claims denied.

$50 Million

The yearly average dollar amount of claims denied by life insurance companies.

.2%

The number of claims appealed annually by consumers.

What to Do If Your FEGLI Claim Has Been Denied

At Trief & Olk, we recognize the emotional turmoil that comes with a denied Federal Employees’ Group Life Insurance (FEGLI) claim. Facing such a situation demands prompt and decisive action to secure your rights and claim the benefits your policy guarantees.

Initially, it’s crucial to comprehend the denial’s basis. Begin by meticulously analyzing the letter of denial from the insurance provider. Denials may occur due to various reasons such as non-compliance with eligibility requirements, disputes regarding beneficiary designations, policy exclusions or limitations, or a lack of necessary documentation. Understanding these reasons is the first step in developing a strategic response.

Should you feel that the denial was unjust, start assembling supportive documents and evidence. Essential items might include death certificates, proofs of relation to the deceased, beneficiary designations, any relevant policy documentation, and prior communications with the insurer. Solid evidence is fundamental, especially if you decide to legally contest the denial.

Next, engage with the insurance company. Clarifying the denial reasons and discussing them may reveal that they were caused by administrative errors or misunderstandings, which can often be rectified with further dialogue. Be ready to submit any additional evidence that could fortify your claim during these discussions.

If direct resolution proves elusive, it may be necessary to consider legal avenues. As a beneficiary, you are entitled to challenge the denial legally and seek the promised benefits. Consulting with a life insurance lawyer can provide insight into your legal options and guide you through the appeals process.

Typically, FEGLI policies allow for an administrative appeal. This process usually requires you to submit further documentation, articulate written arguments in favor of your claim, and seek a review from the insurance company’s appeals committee or a similar authority. It is critical to follow any specified deadlines and procedures when filing your appeal.

Should the administrative appeal fail, or if the insurance company does not respond promptly, legal action might be your next step. This could mean taking your case to federal court to contest the denial and claim your benefits. Here, an experienced life insurance attorney can be invaluable, representing your interests and advocating on your behalf throughout the litigation process.

Ted Treif (Partner)

Life insurance attorney since 1976

Barbara Olk (Retired)

Life insurance attorney since 1976

Shelly L. Friedland (Partner)

Life insurance attorney since 1997

Eyal Dror (Associate)

Life Insurance Attorney since 2007

Fighting for Your Benefits

FEGLI beneficiary claims may be denied for various reasons, including administrative errors, incomplete documentation, or disputes over beneficiaries. However, it’s essential for beneficiaries to understand that denial doesn’t always mean the end of their claim. There are avenues for appeal and legal recourse to ensure that rightful benefits are obtained.

If you or someone you know has had their FEGLI claim denied, don’t hesitate to reach out to Trief & Olk for a consultation. Our experienced team is well-versed in life insurance law and can provide the guidance and advocacy needed to navigate the claims process effectively. We understand the nuances of FEGLI policies and can work tirelessly to advocate for your rights and ensure that you receive the benefits you deserve.

Don’t face the challenges of FEGLI claims denials alone. Contact Trief & Olk today to schedule your consultation and take the first step toward securing the benefits you’re entitled to.