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5 year term life insurance is pretty easy to understand, but people can just as easily get confused by the terminology used by agents and the different websites that sell life insurance. To help you get the best picture we are going to cover the two items need to know when you purchase 5 year term life insurance.
One of the biggest misconceptions of term life insurance is that the term is just the number of years for the policy. The term represents the number of years you are going to get the same premium. So if you get a 5 year term life insurance policy for $20 per month premium, that premium will not change for five years. At the end of five years many insurance companies will let you start a new term without a medical exam. So if you wanted to do another 5 year term life insurance policy you could re-up for a slightly higher premium. If you were to go for a longer term you would get higher premiums due to the increased risk taken on by the insurance company.
How a company determines a premium is not rocket science. The more likely you are to need the insurance the higher the premium. Simply put, the greater the financial risk to the insurance company the greater the premium. There are five main factors that influence the price of term life insurance: the length of the term, the face value of the policy, the age of the person, the health of the person, and the gender of the person. If you are twenty one, in good health, a female and getting a $100,000 5 year term life insurance plan then you will pay much less than a fifty year old man who smokes and gets a $500,000 20 year term life insurance policy. Each one of those factors indicates how much risk the insurance company has that it will have to pay out the face value of the policy. Ultimately, this is what makes 5 year term life insurance so inexpensive. The chances of you passing away in that time frame, if you are in good health, are pretty low.
The 5 year term is useful for a very specific part of the population. People who do not currently have much money to pay for life insurance, but need coverage (if you have children or a mortgage and are married). If you can afford it you are better off getting a longer term because you can lock in the lower prices while you are younger.
The only way to know how much a 5 year term life insurance policy will cost you is to get a set of term life insurance quotes. You can do that easily by filling out the form on the side of this page. It is our pleasure to help you find the right policy for your needs, so if you have any questions or if there is any way we can serve you please contact us.