The government’s annual open season, during which federal employees and retirees choose their health insurance plans comes with an added benefit: It prompts people to take a look at their insurance situation more broadly. In fact, many during open season examine their entire financial lives, in which insurance costs and benefits are major factors.
And that’s a smart thing, said M. Shane Canfield, CEO at WAEPA, a provider not of health insurance but rather of life insurance. He welcomes this phenomenon every year because it’s wise to regularly reevaluate life insurance benefits too, he said. In fact, open season “is our busiest time — the last couple of months of the year — every year,” he said during the Federal News Network Open Season Exchange 2022.
Canfield added: “I think it’s just people thinking about finances in general. And we encourage that you should do this on a regular basis. So it’s a good time to reassess how much you need for life insurance.”
Understanding different life insurance options available to feds
Life insurance takes many forms. WEAPA’s principal product is pooled-risk, term life insurance. Term means a policy is in effect so long as the holder remains paid up for the duration of the term. If differs from other types of policies in that there’s no cash value buildup.
An advantage to term insurance is holders can adjust the death benefit and therefore the premium to fit their current life situation, Canfield said. Premiums rise with age, but plan holder can offset that with a lower benefit stemming from a lower requirement once, say, children are grown. “And people do frequently as they get older,” Canfield said.
“With term life insurance, you’re covering the risk at that time,” he explained. “A lot of people just simply reduce the coverage they have because their need has changed. The amount of cash out they are willing to spend decreases as well. So it’s not an all-or-nothing proposition with term life insurance.”
WAEPA products are only available to federal employees. WAEPA itself is organized as a nonprofit association, currently with some 46,000 members in the risk pool, Canfield said. The spread risk creates a relatively low risk pool, enabling WAEPA to offer lower rates compared to other term life insurance providers, he said.
Comparing federal life insurance options
Canfield pointed out that WAEPA policies can continue after retirement. Plus, WAEPA has launched a program to let former federal employees join as members.
“We’ve opened the plan to all former federal employees too — people that have been members of the federal government,” he said. Until now, if someone didn’t get into a WAEPA plan while employed by the government, it was not possible to do so after leaving federal employment.
“You served your country,” Canfield said. “We’re recognizing that. … If you leave federal service for any reason, you can still apply for it.” WAEPA will be rolling out the post-employment program fully in 2023.
Canfield shared that WAEPA and the Federal Employees’ Group Life Insurance program differ in some respects: For example, under FEGLI, spouse benefits top out at $25,000, and at WEAPA, it’s $500,000. Also, whereas FEGLI upper benefits are salary-based, any federal employee can apply for up to $1.5 million in death benefit from WEAPA, regardless of salary, he added.
Moreover, Canfield said, WAEPA premiums are on average 10% lower than FEGLI offerings. Because WAEPA rates are tied to mortality risk rather than inflation, life insurance as a component of living costs tracks below the inflation affecting nearly all other goods and services, he said.