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Can You Borrow from Your FEGLI Policy | FEGLI Loans

Can You Borrow from Your FEGLI Policy | FEGLI Loans

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.

Two men talking about FEGLI loansThe 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.

Understanding FEGLI Coverage Levels

Federal Employees' Group Life Insurance (FEGLI) provides multiple layers of coverage that many federal workers don't fully understand:

  • Basic Insurance: Your annual salary rounded to the nearest $1,000, plus $2,000. If you're under 45, you receive an Extra Benefit that can double this amount. The government pays one-third of the premium.
  • Option A (Standard): An additional $10,000 in coverage, fully employee-paid.
  • Option B (Additional): 1x to 5x your annual salary. This is the most valuable optional coverage and is fully employee-paid at group rates.
  • Option C (Family): Coverage for your spouse ($5,000-$25,000) and dependent children ($2,500-$12,500 each).

For a GS-13 Step 5 employee earning $107,000 with Basic plus 5x Option B, the total death benefit could exceed $640,000. That's a substantial financial asset — one you can access through a Living Benefit Loan.

📚 Related In-Depth Guides

FEGLI vs. a Living Benefit Loan

FEGLI's built-in Living Benefit feature only pays up to $5,000 and requires a terminal illness with life expectancy of 9 months or less. A Living Benefit Loan, by contrast, lets you access up to 50% of your total death benefit — potentially over $300,000 — with funding in as few as 3 business days and no credit check.

Read the complete FEGLI borrowing guide →

What Happens to FEGLI in Retirement?

Federal retirees can keep FEGLI coverage, but benefits reduce starting at age 65. Basic coverage drops by 2% per month to 25% of its original value (unless you elected "No Reduction"). Option B coverage reduces to zero. This makes timing critical — if you need to access your FEGLI value, acting before age 65 maximizes your options.

Frequently Asked Questions

Can I borrow against my FEGLI policy?

Not through a traditional loan (FEGLI has no cash value). But a Living Benefit Loan borrows against the death benefit — FEGLI Basic and Optional coverage both qualify with $75,000+ total.

How fast can I get funds?

A Living Benefit Loan funds in as few as 3 business days. No credit check required.

Will my beneficiaries still receive a death benefit?

Yes. They receive the remaining death benefit after the loan is repaid.

Ready to Explore Your Options?

No credit check. No monthly payments. Funding in as few as 3 business days.

Get Started Free Call 1-888-274-1777
Life Credit Life Credit

Providing Living Benefit Loans to cancer patients and seriously ill individuals since 2012.

1-888-274-1777

Contact

7924 Ivanhoe Avenue, Suite 10
La Jolla, CA 92037

1-888-274-1777

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Mon–Fri: 9:30am–6:30pm EST

Maximum APR = 35.99%, Minimum repayment = 90 days, maximum repayment = 120 months. Your actual rate depends upon, loan amount, loan term, and collateral, and will be agreed upon between you and the lender. An example of total amount paid on a loan of $200,000 secured by a $400,000 life insurance policy for a term of 24 months at a rate of 18% would be equivalent to $295,188.80 over the 24 month life of the loan, this includes an origination fee equal to 3% of the life insurance policy’s death benefit which serves as collateral. Life Credit Company, LLC is a California licensed consumer lender, as required by law, with its main office located at 7924 Ivanhoe Avenue, Suite 10., La Jolla, CA 92037, Telephone Number 888-274-1777. California Finance Lender License #601K051. This site is directed at, and made available to, persons in the continental U.S., Alaska and Hawaii only. Life Credit is a marketing company. It is not a life settlement provider or broker. Life Credit will refer qualified policies to a licensed entity.

Loans will be arranged or made pursuant to a California Finance Lenders Law License.

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