Retired federal employees who have been diagnosed with cancer or another serious illness may wonder: can you borrow from your FEGLI policy? As every federal employee knows, FEGLI, the Federal Employee Group Life Insurance Program, is famous for its virtues and its limitations. However, it is possible to borrow money from your FEGLI policy.
FEGLI Policy Limitations
One major limitation is that the amount of life insurance coverage is fixed once the federal employee retires. People go through life changes that would suggest coverage should fluctuate, where a reduction in the size of the coverage makes sense. From going through a divorce, or having their spouse pass away to having their children grow up, coverage that was once vital for the continued support of a family may no longer be needed.
The problem is, the policyholder is stuck paying for coverage they don’t need. And the retiree can’t cancel the insurance policy, regardless of circumstances.
If the policyholder has a serious financial problem—like trying to cover the costs of medical treatment, maintaining the policy can be difficult.
FEGLI Loans: The Silver Lining
Here’s one virtue: If the policyholder meets certain criteria, they may be eligible for a loan against the FEGLI policy. It’s a loan where no payments need to be made; the repayment is handled from the proceeds of the death benefit. And they can use the loan for any purpose; it’s up to them.
In that case, the extra insurance coverage, that might otherwise feel like a burden, can be important to determining the possible size of the loan. A negative becomes a positive.
If you were curious: can you borrow from your FEGLI policy? We’re happy to say that the answer is yes. If a Living Benefit Loan could make a difference to you or someone you love, contact us to schedule a free consultation.