No More 5 Year Term Life Insurance: See our Alternative Short Term Plans

5 year term life insurance policies are largely a thing of the past. There may be only one or two carriers in the country who offer a 5 year term anymore.

Out of the more than 60 companies we represent – none of them offer a 5-year term.

However, if you have an agent who knows a thing or two about life insurance (like us), they can show you how to get a 5 year policy at a low cost and with options after 5 years as well.

Read on to have your 5 year term questions answered, and to learn how to get the best life insurance rates overall.

What is 5 year term life insurance

5 year term life insurance is a policy that covers the insured for 5 years. It is one of the shortest term policies out there, after annual renewable term policies.

While shorter life insurance terms typically have cheaper rates, this is not the case for a 5 year term. This is because insurance companies usually don’t see the underwriting process as worth it for such a short policy, and so charge higher rates to make up for it.

Like most term insurances, the policyholder of a 5 year term may have the option to convert their policy once it expires. However, it’s important to get the help of an experience life insurance agent when looking at policies, to make sure that your policy includes a conversion option.

5 year term life insurance alternative products

So if you’re looking for a short term life insurance policy, but don’t want to pay the overpriced premiums for a 5 year policy, what are your options?

Here are the best alternatives to a 5 year plan:

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Annual renewable term

An annual renewable term, or ART, is a flexible life insurance plan in which the policyholder can choose to renew their policy after a one-year term, without having to reapply. This type of policy may be cheaper than a 5 year term, depending on the length of time you’ll need coverage. If you think your coverage needs may be less than 5 years, then an ART may be a better option for you than a 5 year term.

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10 year term

Even though a ten-year term covers a longer period of time, it may be cheaper than a 5 year plan. This is because in the eyes of the insurance company, the cost of writing the policy often outweighs the return of investment, and so they charge a higher premium than they would on a 10-year term. The other reason is every carrier offers a ten-year term and that means there is a lot of competition for your business.

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Protective Custom Choice Universal Life

If you’re looking for a flexible yet affordable plan for a period of 5 to 30 years, Protective Custom Choice Universal Plan might be for you. For example, let’s say you enroll in a standard 10-year term policy. While your premium and death benefit will remain level for the duration of the 10-year term, once the term ends you will face a higher premium to keep the same death benefit. With the Custom Choice UL plan, however, you can continue to pay the same premium, and your death benefit will decrease accordingly as you age.

The below chart shows an example of the UL price structure that lasts to age 121 (we have illustrated the first 30 years). As you can see, the death benefit stays level at $1,000,000 for the first 10 years, with the premium increasing at the 5-year mark. However at the end of the 10 year term, the premium level decreases and remains level for the next 20 years, and the death benefit decreases incrementally as the years go on.

With this plan the policyholder can remain covered for the duration of their term, without having to pay a higher premium as the years go on. This is a great plan for someone who wants long-term coverage, but is looking for the flexibility of a shorter-term plan.

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5 year term rate chart

Who this type of policy might be right for

Because of its overpriced premiums, we don’t recommend a 5 year policy. However, the above-mentioned ART, 10-year term, or UL policy could be a good option for someone looking for a shorter-term policy.

Here are some situations in which an ART or otherwise flexible policy might make sense:

To get short term coverage

These plans are great for anyone in the need of short term coverage. The alternative solutions we mention give you plenty of flexibility to cover any short term obligations.

To insure a key employee

This type of insurance policy can temporarily cover the expenses to a business should a key employee pass away prematurely.

To fund a buy-sell agreement

If a business owner doesn’t have the funds to pay for a longer term insurance, they can purchase a 5 year term to insure their business. Once they have the funds, they can potentially convert to a longer-term policy.

Cost of 5 year term life insurance

During the underwriting process, the insurance company will take many factors into consideration. Below are just some of the factors that the underwriter may assess:

  • Age
  • State
  • Gender
  • Tobacco Use
  • Family History
  • Health Condition
  • Medication History
  • Death Benefit Amount
  • And many other factors

Learn more about the average cost of life insurance here

These factors, among others, go into determining your rate class. Depending on the rate class you in, your premium can vary greatly. Get in contact with one of our agents today using the quote widget to the right, to see which class you fall into.

Your rate class is the biggest factor when determining the average cost of your life insurance. The below example rate chart demonstrates this, showing the the monthly premium costs by rate class for a 40-year-old female with a 20-year term policy and a $250,000 death benefit:

Preferred Best Monthly Rate $ 15
Preferred Rate Monthly Rate $ 19
Standard Plus Monthly Rate $ 24
Standard Monthly Rate $ 27
Preferred Smoker Monthly Rate $ 55
Standard Smoker Monthly Rate $ 69

How to get the best quotes

So now you know that a 5 year term policy is likely not the best option for you. However, if you’re still looking for a short term life insurance policy, our agents are here to help you find the best carriers and rates for your unique situation.

Just fill out our simple quote form, and our comparison engine will pull up rates from over 30 carriers in a matter of seconds. Choosing life insurance may seem scary, but our Insurance Geeks make the process so easy that you’ll wonder why you didn’t use us sooner.