Narrow down life insurance companies by coverage levels, riders offered, medical exam requirements and more to get a life insurance quote.
You may consider a five-year term life policy for protection during key short-term financial obligations, such as covering a key business partner or using it as collateral for a loan. However, in most cases, a policy with a longer term offers better value and guarantees a fixed cost for longer based on your current health.
Plus, only a handful of life insurance companies offer a five-year term, limiting your policy options. Weigh the pros and cons of this term length and compare policies that offer you the best balance of coverage and value.
Average cost of 5-year term life insurance? It depends on your age.
Since a majority of insurers don’t offer quotes for a five-year term, expect to pay a higher monthly premium than for a 10-year policy. To help you compare, a 10-year policy costs around $15 per month for a healthy, 30-year-old man or woman.
However, life insurance rates vary, and the premium you pay is based on your age, health, lifestyle, job, medical history and more.
*Sample rates sourced from EMC Life Insurance for healthy, nonsmoking men and women. Valid as of January 2021.
When a 5-year term policy might make sense
Think about whether five-year term life insurance is long enough to cover your financial obligations and whether its cost is worth choosing the five-year term over a longer one like 10 or 20 years. For example, it makes more sense to buy a 10-year policy with a cheaper monthly premium, even if you don’t need protection for that long.
You may want a short-term policy if you’re:
- Close to financial freedom but not there. A short-term policy protects your family’s financial future while you work toward increasing income or paying off the last few debt repayments, like your mortgage.
- Covering your kids’ college costs. If your kids rely on you to pay for their higher education, opting for a short term may suit you. If you die, your policy will pay for the rest of their college expenses.
- Needing longer protection, but your first term ended. You may want protection for loved ones after your first 20- or 30-year policy until you can tap into your retirement.
- Protecting your business. You can buy key employee insurance to help your business recover or to fund a buy-sell agreement if an important business partner or shareholder dies.
- Securing a loan. Taking out short-term life insurance reassures your lender that you have every intention of paying back the loan, even if you die.
- Supplementing an existing policy. Suppose you bought a 25-year policy when you were younger. Later, you realize that you’re underinsured because of a bigger mortgage, owning a business or having more kids. You can buy an additional policy to cover the rest, a strategy called laddering.
3 downsides to 5-year term life insurance
Most people benefit from choosing a term length that’s longer than five years for these reasons.
You could get similar rates for a longer term
A five-year policy could cost you $5–$10 per month for a young, healthy person. However, the same person could pay $15 to $20 per month for a $250,000, 20-year policy, which locks in your rate for 15 years longer. Depending on personal factors like your age and health, a longer term could be the cheaper option.
You may need another policy after five years — and it’ll cost more
Do the math to determine whether you still need coverage. If you’re under 70 and still have financial responsibilities, you can opt to purchase a new policy before yours expires. It doesn’t have to be a five-year policy; you can choose a longer term or explore annual renewable term insurance, which covers you for a year.
Either way, you’ll have to reapply and prove you’re insurable, meaning you may need to take another medical exam. Your new premium reflects the current market rate and your age and health, so just know that it will be higher. Before signing the dotted line with your current company, it’s a good idea to shop around for the best life insurance rates.
5-year terms are hard to find
Not many life insurance companies offer five-year terms, possibly because this short term doesn’t span the length of most people’s financial obligations. If you want a five-year term, you’ll have fewer insurance companies to choose from. Fewer choices could mean higher premiums charged or choosing a lesser-known company in the industry.
Alternatives to a 5-year term policy
Consider these options if you have short-term life insurance needs but don’t want to pay for an overpriced five-year policy.
- Buy five-year renewable term life insurance. A renewable term life policy lets you choose to renew it each year without needing a medical exam. This option locks in your current health status and a level premium for five years, and you can cancel or keep it after the term ends.
- Get a longer term and cancel before it ends — or keep it. A 10-year term or 20-year term life policy can cover your five-year life insurance needs at a lower monthly cost. If you truly don’t need it after five years, you can cancel the policy to save on the monthly premiums.
- Go with convertible term life insurance. Most term policies have a conversion feature. If yours does, you can upgrade to a permanent policy like whole life insurance before a deadline. Though permanent policies cost more, they never expire and have an investment side to them.
- Opt for a burial policy. If you’re looking to cover your funeral and end-of-life expenses, a burial policy would work better than short-term life insurance. This whole life policy stays with you for the rest of your lifetime as long as you pay the premiums.
A five-year term life policy may make sense to protect a specific financial obligation like your kids’ college expenses or starting a new business. However, weigh this policy’s cost against the cost and benefit of buying a longer term like a 20-year term life policy. You may find that longer-term policies offer the best value or that you have more choices of reputable insurance companies.
Since not many insurers offer 5-year term policies, check out other term life insurance companies to make sure you’re choosing the right option for you.
More guides on Finder
Life insurance stats 2023
A peek into Americans’ attitudes about life insurance.
Compare burial insurance for funeral costs
Cover funeral, burial and medical costs and help your loved ones financially when you die — but at a high price.
Is group life insurance worth it?
Learn about the life insurance you might be offered through work — and which exclusions to watch out for.
Best life insurance companies
These 10 life insurance companies beat their competition when it comes to their policy options, riders and reputations.
Guide to estate planning
Use this handy estate planning checklist to ensure your loved ones are taken care of financially after you die.
How to get life insurance with a chronic illness
Buying life insurance with a pre-existing, chronic or terminal health condition is possible — but your options may be limited.
How to get life insurance if you’re considered high risk
Your options when your medical history, lifestyle or hobbies make getting coverage difficult.
Are life insurance premiums tax-deductible?
The tax implications of life insurance as an individual, self-employed person, owner of an LLC and more.
24 most unfortunate ways to die
Find out your odds of dying in more than 20 circumstances — and prepare to be surprised.
How to cancel or change your power of attorney
In most cases, you can change the person who’s empowered to make decisions on your behalf.
Ask an Expert