5 Year Term Life Insurance Policy – A Complete Guide

A 5-year term insurance policy offers financial protection to your dependents for a period of 5 years. This short-term policy can help your dependents manage their basic life expenses. Such a plan can even be offered as a single-premium term plan, depending on the insurer.
Term insurance does not offer a maturity benefit, unless you opt for the Term Insurance with Return of Premium (TROP) feature.

A 5-year term life insurance plan is ideal for individuals who seek short-term financial security. Such people can be the following:

• Young Professionals: A 5-year term plan can help bring financial discipline, particularly when starting career.


• Newly Married Couples: A great option for newly married couples who do not decide on long-term coverage at the beginning of a new life.


• Homemakers: A short-duration term life insurance plan allows homemakers protect their family in case of her sudden demise.

• Offers Affordable Short-Term Protection: This term plan option gives adequate financial coverage at a low cost to fulfil short-term financial responsibilities


• Ideal for Short-Term Goals: Works well for covering short-term loans by safeguarding the family for a few critical years


• Quick Safety Net: Provides immediate peace of mind knowing your family will get financial support in your absence.


• Flexibility to Reassess Later: With a 5-year term plan in place, you are free to adjust, extend, or upgrade your policy based on your life’s changes.


• Lower Commitment: Ideal for those who prefer short-term commitments.

• Coverage Ends Quickly: Five years is a relatively short term, and protection stops unless you renew or purchase a new policy.


• Not Suitable for Long-Term Needs: Not suitable for long-term goals, such as raising children or paying off a home loan.


• Higher Renewal Premium: Renewing a term plan after five years may cost more due to age or health-related changes.


• Possible Refusal at Renewal: If the plan is not auto-renewable, and your health worsens, the insurer may refuse policy renewal.


• No Savings or Maturity Value: Like typical term plans you do not get any returns if you outlive the policy term.

Term insurance premium is a fixed payment given to insurer to keep the policy active. Failure of insurance premium payment can lead to policy cancellation and coverage withdrawn by the insurer. The premium cost of different term insurance plans depends on the following factors:

• Age
• Previous Claims
• Lifestyle Habits
• Health Conditions
• Moral Hazards
• Sum Assured
• Policy Term
• Riders Chosen
• Area of Residence
• Tobacco and Alcohol Use

Premium can be calculated using online term insurance calculators, offered by insurance companies.

However, if you wish to calculate premium manually, you can follow the simple formula given below:

Premium = (Base Premium + Additional Premiums) × Coverage Amount

Here:

1. Base premium is based on factors like:

• Age
• Gender
• Policy tenure (in this case, 5 years)

2. Factors like smoking status, current health condition, and riders chosen impact policy premiums.

Five year term life insurance differs from other term plans in the following manner:

Follow this step-by-step process to buy a 5-year term insurance policy online:

Step 1: Enter Your Basic Details

Choose the insurance company, log in to their official portal and fill in the basic details like:

• Name
• Age
• Date of Birth
• Contact Details
• Smoking Habits
• Annual Income
• Expected Life Cover

After filling in these details, you can view the benefits and features of your desired policy. Read the details thoroughly and choose the most suitable option.

Step 2: Fill in the Proposal Form

Fill out the details in the life insurance proposal form, which needs essential details like:

• Personal Details
• Health Conditions
• Lifestyle Details
• Nominee Details
• Existing Life Cover

Step 3: Submit Required Documents

Next, the customer needs to provide various documents, such as:

• Identity Proof: Aadhaar Card or PAN Card
• Address Proof: Address certificate, electricity bill, or Aadhaar card
• Health Documents: Reports of the required medical tests

Note: The list of documents needed is provided while filling out the proposal form.

Step 4: Undergo Medical Test

You will need to undergo comprehensive medical tests at a recommended diagnostic centre. This will allow your insurer to have a clear understanding of your health conditions.

Step 5: Premium Payment

Pay the online premium through your preferred payment mode. Once the payment is successful, a confirmation message will be sent to you via an email.

Step 6: Issue of Policy

The insurer will verify your application form and associated documents. Based on their verification, the insurer will either issue the policy or reject it on practical grounds. You will receive confirmation and policy details upon acceptance of policy application.