Why Don’t Insurers Offer A 5-Year Term Life Policy?
5-year term life policies are not available because, although there is potential profit (infinitely small) for the insurance company, it’s far too low to justify the hassle (and cost) of creating a product that is likely to be unprofitable.
For example, if a business were to sell a widget at $5 per unit and it costs them $4 to create it, that $1 of profit is far too low to justify selling the widget. You can’t operate a business on a $1 margin, no matter how many of them you could sell. It’s the same scenario with 5-year terms.
Alternatives To A 5-Year Term Life Insurance Policy
If you need life insurance for a short period of time, term life insurance is the ideal product. Since there are no 5-year term policies, here are the ideal alternatives:
- 10-year term policy: This is still incredibly affordable and available with virtually every insurer. Nearly every 10-year term life policy will have a level premium that remains the same.
- Short-term life: It’s often called a “1-year term” or “annuall renewable term”. The policy lasts 12 months, at which point it automatically renews at a higher rate. The prices are still very low, but the annual increase is undesirable to many people.
How Much Does A 10-Year Term Life Policy Cost?
Below are some example 10-year term life insurance prices. Keep in mind that term life insurance rates are always based on many factors, such as the amount of coverage, length of the term, age, health history, lifestyle, gender, tobacco or nicotine usage (if any), state of residence, and whether or not you take a medical exam.
Frequently Asked Questions
An annual renewable term life policy is the shortest term of life insurance. These plans last for 1 year and then automatically renew at a higher price, and will continue to do so until you cancel the coverage.
Any type of life insurance can be cancelled at any time. If you only need coverage for five years, you could buy a 10-year term and cancel it after five. Please note, however, that when you surrender the policy, you will not get any money back.
Life insurance companies make nearly all their profits by taking insurance premiums and investing them in a wide range of assets, including stocks, bonds, commercial real estate, companies, and more. The premiums on a 5-year term would be so low that the insurer would collect only a few hundred dollars (at most) over the 5 years. On top of this, creating a life insurance product for the public is incredibly expensive (it costs millions of dollars) and takes years from start to finish before it’s ready to sell. Another factor is the ongoing administrative costs associated with selling the product. Finally, consumer interest in five-year term policies is exceptionally low. Ultimately, the initial capital and time investment are too high to justify selling a policy type that has virtually no ability to generate even a modest profit (it would be a near-certain loss).
- Nationally licensed life insurance agent with over 16 years of experience.
- Personal annual production that puts him in the top .001% out of all life insurance agents in the nation.
Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
