Turning expanded eligibility into a better coverage plan for federal clients

Recently, the Worldwide Assurance for Employees of Public Agencies (WAEPA) announced an increase in its maximum life insurance coverage from $1.5 million to $2 million. The organization also expanded eligibility to include more family members of federal employees.

Now, former federal employees can join WAEPA even if they didn’t enroll while working for the government, and current members can maintain coverage after leaving federal service.

“Expanded eligibility can be a game changer for individuals and families who have had trouble qualifying elsewhere,” said Joshua Lavine, CEO Capitol Benefits.

These changes should encourage advisors to review life insurance requirements with current and former federal employees and explore alternative solutions when appropriate.

How to assess life insurance needs

When meeting with a federal client, the first step is to list the life insurance coverage they already have, including any employer group coverage, individual policies, and association plans.

This could help reveal any existing gaps.

Next, determine how premiums would change as the client ages. It’s also important to consider whether they can keep their coverage after a job change.

A higher coverage limit may benefit some clients more than others. Advisors should consider how much a family would need to replace lost income, pay off a mortgage and other debts, cover education costs and final expenses, and support a surviving spouse.

“Start with the need, not the cap,” said Hans Goldstein, enrolled agent and licensed California insurance producer at Goldstein & Co.

Imagine a 50-year-old federal employee earns $120,000, owes $400,000 on a mortgage, and has $300,000 in existing life insurance coverage. Using the standard of 10 times annual income, the client would need $1.2 million in coverage.

Adding the mortgage balance and subtracting existing coverage leaves a potential gap of $1.3 million, meaning $2 million in coverage may be more than necessary.

“Buying the maximum available when it’s not actually necessary can increase cost without adding much protection, and buying less than the need can leave a gap, so the number should reflect each client’s unique circumstances,” Lavine explained.

When other family members qualify for coverage

When parents, adult children, or other relatives become eligible for federal life insurance, the planning questions change.

Family member coverage generally depends on the program’s specific rules and an insurable interest, meaning the client has a legitimate financial or personal reason to insure someone else.

That’s why it’s vital to understand the client’s reasons for protecting a family member in the first place.

“Final expenses and a co-signed debt reveal a real need while income replacement for someone with no income does not,” Goldstein explained.

Additionally, coverage amounts for children and young adults are often modest, and it is worth comparing them against what a standalone policy would offer.

Review coverage options before a client leaves a federal job

Federal employees may find that their life insurance options change after they leave government service, making it important to review their coverage before they depart.

“Check whether a client’s coverage can be continued, whether the cost changes, and whether it can be converted or ported to another policy,” Lavine said.

Compare their current coverage against a new individual policy. This is particularly important if a client’s health has changed since they initially enrolled.

Ultimately, being proactive and reviewing life insurance options before a client leaves the federal workforce can help prevent coverage gaps and preserve access to affordable protection.

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