5 year term life insurance: budget-friendly financial protection
For families on a tight budget, term life insurance offers affordable financial protection. Term life allows families to purchase insurance for a specific period of time, otherwise known as the term period. Term life features low premiums that make it an attractive option for families trying to stretch their dollars. Of all the coverage periods available, 5-year term policies are typically very affordable.
Basics of 5-year term life insurance
Like all term life policies, 5 year plans feature fixed rates for the duration of the term. Life insurance companies set their rates based upon the likelihood a claim will be filed within the term. Individuals who are young and healthy can often get rock bottom life insurance rates on 5-year terms because, statistically, their mortality risk is quite low. Rates for longer terms are usually higher because mortality risk increases over time.
In addition to providing an inexpensive life insurance option, five-year term life insurance can be used to cover temporary insurance needs. You may want to consider a 5-year policy to cover the following financial obligations in the event of a death:
- College tuition
- Auto loan
- Home equity loan
- Business loan
- Student loan
Tips for finding the right five year term policy
For those with limited funds, price may be the most important factor in making a purchase. However, when comparing life insurance quotes, there are two important features to consider: the first is a conversion option and the second is a renewal guarantee.
If you have a young family and are just starting your career, you may be strapped for cash right now. Five years and a raise or two later, you might find yourself in a much better position. While term life insurance can provide a temporary safety net, permanent life insurance offers guaranteed coverage for life. Look for a 5-year term life policy with a conversion option that will allow you to convert your insurance into a permanent life insurance policy in the future.
Even if you don't want to switch to permanent life insurance, such as whole life insurance, you may want to renew your term life insurance at the end of five years. Policies with renewal guarantees allow you to buy another term of insurance regardless of your health status. Just keep in mind that at renewal time, the life insurance company can increase premiums.
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