Because of it’s low premium costs the 5 year term life insurance policy is one of the easiest policies to understand. It maintains a guaranteed level premium for 5 years. With many companies, if you don’t convert this policy, you will have no more insurance after the 5 year period has passed. In other cases, however, the 5 year term life insurance premium increases at the end of the first 5 years and may increase every 5 years thereafter. This kind of life insurance policy is considered temporary life insurance. 5 year term life insurance is designed to fulfill temporary insurance needs.
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Advantages Of 5 Year Term Insurance
- This policy has one of the lowest premiums you can find in a life insurance policy.
- The death benefit remains level for the duration and is guaranteed.
- The death benefit is paid to your beneficiary free of income taxes in most cases.
- The owner has the option of converting his or her 5 year term life insurance to a permanent life insurance policy… cash value life insurance policy …without having to qualify for it all over again.
- Some life insurance companies offer the owners of this policy the option of renewing it every 5 years…usually at a higher premium.
Uses Of The 5 Tear Term Life Policy
- This 5 year term life policy is usually used for temporary life insurance needs like covering an outstanding loan.
- It may be used to guarantee funds to pay for a college education for a child in the event of your death.
- Because of the low cost of the premiums it is used to cover family needs on a temporary basis. In this case it is usually converted to permanent insurance when the owner is able.
- If they are short of cash business people use the 5 year term policy to fund buy-sell agreements if one of the partners or shareholders should prematurely die. Whenever the business is doing better they either convert the 5 year term insurance policy to a permanent policy or they buy a term life policy for a longer period of time…if they can qualify for the new policy.
- 5 year term insurance is used for key employee insurance on a temporary basis.
These riders are available and can be added to your 5 year term life insurance policy at a minimal extra cost.
- The waiver of premium rider takes away the burden of premium payments during disability. You must be disabled usually for a minimum of 6 months.
- The accidental death benefit rider …or double indemnity rider allows for the payment of double the face amount of the 5 year term policy if you should die in an accident.
There are other available riders that can be added to this policy but they vary from company to company.
The 5 year term life insurance policy can be bought as a rider also. It is usually added to a permanent life insurance policy providing additional life insurance for the insured. Some companies offer 5 year term life insurance as a rider on the lives of a spouse or children.
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