Our top pick: LadderLife™ Life Insurance
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Term life insurance is flexible and affordable, and provides protection for a set period of time. Some insurers sell five-year term policies, which are ideal for those with short-term, temporary financial needs — such as a mortgage or business loan — or seniors inching toward retirement. But it’s a rare offering.
Life insurance rates vary from person to person. The premium you pay is a product of your age, health, lifestyle, occupation and family medical history, and the length of your term.
In most cases, the longer the term, the more you’ll pay. However, only a handful of life insurance companies offer a five-year term, as the cost of writing the policy often outweighs the return of investment. As a result, you may find that you can get a better deal on a 10-year policy.
Ideally, your life insurance policy should cover your longest financial obligation. If you have short-term, temporary needs, a five-year term may be the right fit. In general, this term makes the most sense for those who are reaching retirement age and those laddering life insurance policies to secure loans, supplement their income and protect their businesses.
The most common reasons to purchase a five-year policy include:
Your coverage expires with your policy. You’ll want to reassess your life insurance needs after your policy ends, here are the paths you can take:
When writing your policy, life insurance companies first consider your age and health. The reason is far from subtle: They know the older you are, the more likely they’ll have to pay out your policy.
To determine your rate, underwriters look at life expectancy data.
Let’s use a 60-year-old policyholder as an example. According to our research, the average 60-year-old man’s risk of dying in the next five years is 6.37%. For a woman, it’s a little lower at 3.84%.
To put this into context, look at these figures next to the average life expectancy in the US. A man who hits his 65th birthday can expect to live until 84.3, while a woman is likely to live until 86.6. These are average numbers — around a quarter of 65-year-olds will reach the age of 90.
If you have people relying on your income, a term policy is an affordable way to protect your family. While five-year policies aren’t readily available, they make sense for those who have short-term financial obligations. They’re also popular among seniors edging closer to retirement and business owners who are trying to secure loans and key employee insurance.
Check out our guide to life insurance to compare providers and find the policy that best meets your needs.
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