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5-Year Term Life Insurance

Term Life Insurance has been in demand lately as it provides financial coverage for the future to the family members of the insured person. There have been many term life insurance policies in the market. A responsible buyer will make sure to select the appropriate term life insurance plan that covers the family as well as its premium doesn’t burn a hole in the pocket. 

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One of the term life insurance plans that people need to know about is 5-year term life insurance.

What is 5-Year Term Life Insurance?

This plan covers the insured person for 5 years. The 5-year level term life insurance is one of the shortest term life insurance plans after the annual renewable term insurance policy. Unlike other short-term life insurance plans which are available at affordable rates, the 5-year level term life insurance has higher rates as insurance companies do not consider the underwriting process worthy for a shorter policy. This insured person under this policy, too, has the option to convert their policy once it expires. But for this, it is recommended that the person who is planning to opt for this plan seeks help from an expert to ensure that the policy does have a conversion option. 

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Eligibility Criteria for 5-Year Term Life Insurance Policy

The table below displays the conditions that need to be fulfilled to avail of the 5-year term life insurance:

Parameters Details
Minimum age to avail the insurance 18 Years
Maximum age to avail the insurance
  • 65 years 
  • 55 years in case one opts to pay premiums till 60 years of age
Maturity age  Depends upon the insurance company
Policy Tenure
  • 5-67 years,or 
  • Fixed-term coverage till 100 years age
Premium Payment Tenure Depends upon the insurance company
Total Assured Amount Depends upon the insurance company
Premium Payment Mode
  • Single
  • Annually
  • Semi-Annually
  • Monthly

Now that the eligibility criteria have been discussed, it is time to look at some features that make 5 year level term life insurance a better option than other term life insurance policies in the market.

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying the plan.

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Key Features of 5-Year Term Plan

The 5 year term life insurance has the following key features:

  • Death Benefit: One of the prime factors that a policyholder looks for in a term life insurance policy is the death benefits. A death benefit is an amount received by the nominee under the policy after the unfortunate demise of the insured person. In the case of 5 year term life insurance, the nominee is bound to receive a death benefit sum which would be higher than the traditional term life insurance plans.

  • Low Premium: The 5 year level term life insurance is available are lower premium rates, depending on the age of the individual purchasing the plan. The plan has flexible payment modes and discounts that make it pocket-friendly.

  • Additional Riders: A term insurance rider is an extension made to the existing term plan that provides the policyholder increased coverage. The policyholder is entitled to avail extra cover through the addition of these riders to the current plan, thereby enhancing the protection to help the future individual requirements.

Benefits of 5-Year Term Life Insurance

In addition to the above-stated features, some more benefits are attached to this plan, and they are as follows: 

  • Lower Premiums for Specific Groups: If an individual does not fall into the category of smoker, then they can avail of the 5 year term life insurance at a lower premium. Similarly, many insurance companies provide lower premium options for female policyholders. 

  • Terminal Illness Benefit: The 5 year term life insurance has the provision of enabling the in-built accelerated terminal illness benefit to the insured person. Under this benefit, a lump sum amount is paid to the insured person if an end-stage illness has been diagnosed and is expected to die within 12 months. Depending upon the plan that has been selected, the payouts are decided.

  • Tax Benefits: All the premiums paid and the benefits yielded from the 5 year term life insurance plan is eligible for tax benefits under section 80C and section 10(10D) of the Income Tax Act, 1961. The death benefit offered under this plan is subjected to tax benefit as per the selected benefit structure by the insured person. Many individuals opt for a term life insurance plan as they get tax benefits on the payment of premiums.

  • Limited Premium Payment Option: An individual has the option to pay premiums under this plan for a limited tenure till the age of 60 years. Many insurance companies offer this flexibility to the insured person.

What is the Need for 5 Year Term Life Insurance?

The following are some advantages under the policy;

  • Predictability: The insured person under the 5 year term life insurance will always be aware of the amount of coverage that will be left behind for the members of the family post the demise. 

  • Budgeting Efficiency: The insurance company and the insured person under this scheme can additionally set a single maturity amount and then proceed further. The benefit of budgeting efficiency comes here due to intend-level premiums.

  • Stability: The amount of the premium or the coverage remains constant every year. Therefore, there is no need to worry about premium increasing any time during the policy being active.

  • Smart Planning: The 5 year term life insurance helps in planning wisely about the immediate future by gaining insights about where to spend money and thereby ensuring peace of mind during the duration.

  • Health Benefits: If the person intending to purchase a 5 year term life insurance is in good health, then they would be able to buy the plan at affordable premiums because of low risk to health. 

Before purchasing a 5 year term life insurance policy, you must research the various policies in the market and then plan your purchase. Many insurance companies offer different benefits, therefore, it is advisable to study each plan thoroughly before purchasing. 

Points to Keep in Mind Before Buying 5-Year Term Life Insurance

Here is a list of points you should keep in mind before buying 5 year term life insurance:

  • Good research is to be conducted by the policy buyer to find out the most appropriate term plan that provides comprehensive coverage as well as is not heavy on the pocket.

  • Get in touch with the insurance company and discuss the benefits and the disadvantages they have to offer with the scheme provided.

  • A medical test is being conducted by the insurance company to examine which plan is best suited for the potential policy-buyer.

  • Based on the results of the medical tests, there are multiple options produced that can be added to the main term life insurance plan.

  • Final discussion on the tenure of the plan, the premium, and the mode of premium payments is finalized and the plan begins to secure the policy buyer.

Factors Affecting 5-Year Term Life Insurance Premium Rates

Each insurance company needs to verify some details about the insured person, and for the same reason, there is an underwriting process that is being conducted before proceeding to finalize the policy to the person. The details verified during the process are as follows:

  • Age

  • State

  • Gender

  • Tobacco Use

  • Family History

  • Health Condition

  • Medication History

  • Death Benefit Amount

  • Information about the nominee

  • And many other factors

These factors, among others, go into determining the person’s, who is purchasing the policy, rate class. Depending on the rate class of the policy buyer, the premium can vary to a great extent. Get in contact with a responsible agent to see which class the policyholder would fall into. The rate class is the biggest factor when determining the average cost of the term life insurance of the insured person.

Now that so many details about the 5 year level term life insurance have been discussed, there has to be some exclusion that the policy does not cover. 

Documents Required to Buy 5 Year Term Life Insurance 

Here is a list of documents required by the insurance company before buying 5-year term life insurance plan:

  • Officially Valid Documents (Any of the below-mentioned documents)

    • Passport

    • Voter’s ID

    • Duly signed Job card issued by NREGA 

    • AADHAAR Card

    • National Population Register letter containing details of name, address and AADHAAR number

    • Or any other Central Government document 

  • In addition to the Officially Valid Documents

    • PAN Card/Form 60 

  • If the Officially Valid Documents do not have the address updated:

    • 1-2 month’s old Utility Bill of any service provider (telephone, electricity, post-paid mobile connection, water, piped gas)

    • Municipal or Property Tax Receipt

    • Pension orders issued to retired

    • Employees of Government Department or PSUs, if they contain the address

    • Letter of accommodation allotment from employer , i.e., by State / Central Government departments/ PSUs/ regulatory bodies/ scheduled commercial banks/ financial institutions /listed companies 

  • Income ProofFor Salaried Individuals (Any one of the below-mentioned documents)

    • Bank statement showing salary credit for latest 3 months

    • Latest 2 years Income Tax Returns

    • Latest year Form 16

Note: Know what is term insurance first and then buy a term plan for your loved ones.

Exclusions

Here is a list of common exclusions that generally 5 year term life insurance policies do not cover

  • Death due to consumption of alcohol or drugs

  • Death due to the event of war

  • Death due to participation in the racing activity or a hazardous activity 

  • Death due to activity that is criminal in nature

  • Death due to pregnancy or childbirth or complications arising out of it

  • Death due to pre-existing illness.

Smokers are likely to succumb to lifestyle diseases and are categorized under high-risk pools. This is the prime reason why they are charged a higher premium.

Now it is time to address the frequently asked questions by the policy buyer.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

FAQs


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