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What to Expect from a Five-Year Term Life Insurance Plan

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Life insurance is an essential economic safety net for families, but it can be challenging to find the right policy. Term life insurance policies are traditionally one of the most popular types of life insurance. However, those with a five-year term are not as desirable as they once were.

In fact, many insurance companies no longer offer five-year term life insurance at all. Still, you can find companies that provide a short-term life insurance policy, which is affordable and that offers options after five years.

These policies are typically offered at a reasonable price compared to other traditional life insurance policies. They also offer more versatility in terms of coverage. As a result, short-term life insurance is an excellent option for families who need life insurance but don’t want to be stuck in an ironclad long-term policy.

Let’s take a look at what these types of policies offer and whether or not it’s the right choice for you.

What is term life insurance?

Term life insurance is a form of insurance that provides coverage for a set period, usually between 10 and 30 years. Suppose the insured person dies in the course of the policy term. In that case, the death benefit will be paid out to the beneficiaries. If the insured lives past the policy term, they will not receive any death benefit.

There are two main types of term life insurance: level term and decreasing term.

  • Level term life insurance provides coverage for a set time at a fixed rate, meaning that your premium will not increase over the policy’s life.
  • Decreasing term life insurance provides coverage for a set period, but the death benefit decreases over time.

These types of term life insurance have their own set of advantages and disadvantages, so it is essential to investigate each before purchasing a policy.

What is five-year term life insurance?

A five-year term life insurance policy is a good option for those looking for affordable protection. This sort of policy provides coverage for a set time, typically five years, and pays the insured a death benefit if they pass away during that time frame.

After annual renewable term policies, a five-year term policy is one of the shortest policies available. Keep in mind that this type of term life insurance typically has higher premiums than those with a longer term but which are still considered short term.

This is because insurance companies don’t believe the underwriting process is worth it since a five-year term is so short. To make up for that, they charge higher rates.

The good news for you is that if you’re able to find a company that offers a five-year term policy, you should have the option to continue your coverage once the original term expires.

Five-Year Term Life Insurance Alternatives

Suppose you don’t wish to pay the higher premiums of a five-year term policy or can’t find a company that offers one. In that case, there are some excellent alternatives out there.

For example, some five-year term life insurance alternatives include whole life insurance and universal life insurance.

Whole life insurance gives coverage for your entire life, not just a specific period. Universal life insurance offers lifelong coverage but more flexibility than whole life insurance.

With that said, there are also short-term alternatives available such as:

  • An annual renewable term policy: ART policies are flexible and can be renewed each year. Plus, they may be cheaper than five-year term policies.
  • A 10-year term policy: A 10-year life insurance policy may be cheaper than a five-year plan. The carrier sees it as less of a risk and therefore charges you less.
  • Company-specific policies: If you are looking for long-term coverage but don’t want to be locked into a plan, check your options with various companies. Some companies allow you to remain covered for the duration of your term without paying a higher premium as the years go on. 

Renewable Term Policies

What does “renewable” mean when it comes to life insurance policies? In short, it means that the policy will continue in force for an additional term or terms up to a specified age. This is true even if the insured’s health (or other factors) would cause them to be rejected if they applied for a new life insurance policy. 

Renewable term policies are a fantastic option for those who want the flexibility to renew their policy each year. Although yearly renewable term insurance is no longer the most popular term life insurance, it may still be a good option for some people.

Currently, a 20-year term is the most popular renewable term out there. However, consider that many companies won’t sell term life insurance to someone if the term ends after that individual’s 80th birthday.

Who may want five-year term life insurance?

A five-year term plan might be a good option for someone looking for shorter coverage.

For instance, this type of policy can be a good choice for young adults who are just starting their careers. It may also be good for people nearing retirement and who want to have a life insurance policy all set just in case.

Additionally, employers can use it in the event that an essential employee prematurely passes away.

Keep in mind that a five-year term policy will typically be more expensive than a longer-term policy. Moreover, other short-term policies on the market may make more sense.

Therefore, it’s crucial to consider your options carefully before deciding on the right life insurance policy.

How much does a five-year term policy cost?

The insurance underwriter will consider many factors when determining the final cost of your policy. By understanding a few of the most important factors, you can be better prepared for the process. 

A few of the factors that the underwriter may assess include:

  • Age
  • State
  • Gender
  • Tobacco use
  • Family history
  • Health condition
  • Medication history
  • Death benefit amount

You can find out more about the average cost of life insurance using informative sources such as the Insurance Information Institute. Keep in mind that your rate class is the most significant factor when determining the average cost of your life insurance.

How to Find the Best Term Life Insurance Company

Suppose you’re in the market to purchase a five-year term life insurance policy or want to learn more about alternative options. In that case, you should talk with an agent from a reputable insurance company.

To do that, you will want to consider many factors. Some of the most important considerations include:

  • The company’s financial stability: You want a company that is going to be around for a long time and has enough money to pay your claims. 
  • The company’s history: You want one that has a good track record and a history of satisfied customers. 
  • Customer satisfaction assessments: You want a company that gives world-class customer service from the moment you start looking for insurance until it’s time for a claim. 
  • The types of policies offered: It’s essential to find an insurer that provides the kinds of policies you need so you can be sure your coverage is as comprehensive as possible. 
  • The fees associated with the policies: It is crucial to find an insurance company that provides policies that fit within your budget. 

The Final Word on 5-Year Term Life

Term life insurance is one of the more popular life insurance policies available. It offers protection for a set time, typically five, 10, or 20 years. If you pass away within that lapse of time, your beneficiaries will receive the death benefit.

Five-year term life insurance is not as popular as it once was, and other short-term policies may be more attractive.

These include:

  • Whole life insurance
  • Universal life insurance
  • Term life insurance with a return of premium rider

There are several alternatives to term life insurance, such as whole life insurance and universal life insurance. These policies offer different benefits and features, so it’s essential to compare them before choosing one.

To find the best term life insurance company, you’ll want to consider the financial stability, customer satisfaction ratings, and the charges associated with the policy. Just remember to choose the company that meets your specific needs and budget.




William Blesch

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