Federal life insurance policies face major rate hikes

Many Americans have life insurance simply because it is among the benefits offered to them by their employers. And while they may be aware of those policies, they might not always be vigilant about keeping close tabs on what they cost, and why. As a result, many may be aggrieved to see that their rates are changing – for potentially thousands of federal employees, a major alteration is coming at the start of next year.

Many current and retired federal government workers who have life insurance through their employer are going to see their premiums change – potentially significantly – on Jan. 1, 2016, according to a report from Government Executive. The federal Office of Personnel Management (OPM) recently announced that some rates for policies obtained through the Federal Employees' Group Life Insurance Program will increase, while others will remain the same or even decrease.

Getting into specifics
The good news for employees with the Basic Insurance policies through the program is that there will be no change for their premiums beginning next year, the report said. Further, most rates for coverage options A, B, and C will drop.

However, those who carry Post-Retirement Basic Insurance with either a 50 percent reduction, or no reduction, will see their premiums rise, the report said. This is also true of older employees with life insurance options B and C. In a notice posted earlier this month, the OPM said that this is because the law requires the program to set premiums differently and independently based on each age group so that the systems at every level can function with financial independence and pay for themselves.

Federal employees will soon see changes to their life insurance policies, and they'll need to prepare for them.

More good news
Meanwhile, the OPM also revealed that it will have what is known as “Open Season” for the life insurance program late next year, the report said. Federal employees are automatically enrolled in the standard life insurance policy upon hire; thus this open season will give employees the ability to alter their current plans or take on more benefits as they see fit.

Open Seasons are extremely rare, as the last one occurred in 2004, and may therefore be a time at which many federal employees should make the effort to assess their current life insurance positions and determine whether they match their actual needs, the report said. This coming Open Season will run for the entire month of September 2016, but any changes made will not go into effect until October 2017.

All of these issues should reiterate to life insurance issuers the importance of helping people better understand their coverage going forward. This may help individuals feel better about where they stand, and allow them to make the most informed decisions possible about future changes and what their needs may be over the course of several years or more.