5-Year Term Insurance Policy: How It Works & Key Details

Written by : Knowledge Centre Team

2025-12-04

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8 minutes read

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A term plan is a type of life insurance that provides you with life cover for a specific term or period. Likewise, a 5-year term plan is a variant of the same, under which you will be covered for 5 years. From some insurers, it is also the minimum duration for which you can buy a term plan. The nominees will receive a sum assured if the policyholder unfortunately passes away within the policy’s term.

Key Takeaways

A 5-year term plan provides affordable life insurance coverage for a fixed duration.
It is ideal for short-term needs such as loans, temporary relocation, or nearing retirement.
If the policyholder survives the term, no benefit is paid unless return of premium is chosen.
In case of the policyholder’s death during the policy term, the sum assured is paid to the nominee.
The return of premium option offers a refund of premiums paid if the policyholder survives the term.

When to Consider Buying a 5-Year Term Plan?

You may need life insurance coverage for a short term only in specific situations. However, for the rest of the time, it is required for you to consider an adequate term plan to fulfil your long-term requirements.

You may consider the five-year term plan under the following situations:

You have taken a short-term loan for urgent needs
You are close to retirement but need to keep your dependents financially covered
One of your family’s important financial goals falls within the period
You are moving out of the country or a remote location for a short period
Want to keep your family safe while you decide on a long-term life cover for them

How does a 5-Year Term Plan Work?

Now that you know what a 5-year term insurance is, let's look at how it works. So, before you pay the premium, you have to decide the following things:

The duration for which you are buying (In this case, 5 years).
The premium payment mode includes Regular payment, Limited payment, and Single payment.
The sum assured you want.

After this, your premium is calculated. Now you need to pay the premium till the plan is running. Here also, there are two different scenarios that may arise:

If You Survive the Policy Term: Upon successfully completing 5 years of a generic term plan, no benefits are payable.

But if you have opted for a term plan with a return of premium option, you will be given back all the premiums you have paid.
If the Policyholder Untimely Passes Away During the Policy: There are unfortunate times when the policyholder might pass away during the five years of the policy. In such cases, the family will receive the death benefit.

This is the sum assured you selected at the time of purchasing your policy. With the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you can opt for the return of premium option as well.

Click to use: Term Insurance Calculator

What are the Five Benefits of Buying a 5-Year Term Insurance Plan?

A 5-year term plan, unlike the other ones, has some unique benefits. They will provide you with the following benefits:

Life Insurance Cover: It is the main purpose of a term plan. It provides life coverage. A fixed sum assured decided by you at the start of the policy is provided to your family in case you die. This amount can be used to meet the daily needs and to achieve the family’s goals.
Affordable: Term insurance is the most affordable form of life insurance you can get. You can opt for a high sum assured with affordable premiums. This is because:
- Unlike other plans such as ULIP, there is no fund to be managed.
- Absence of maturity benefits
- The simple process of buying
Easy to Understand: Term insurance is the simplest form of life insurance present. There is not much understanding required. Also, there is no investment component present. This means you are not required to be constantly involved in the policy.
Options to Select Riders: Riders are the additional benefits that can increase the coverage of your existing policy. A term plan includes riders such as:
- Critical Illness rider
- Accidental death rider
- Accidental Total and Permanent Disability
Tax-Benefits: Term insurance is eligible for various tax deductions of the Income Tax Act.

You can claim deductions of up to Rs 1.5 lakh towards the premium that you pay for your term insurance. This is available u/s 80C of the Income Tax Act

Also, the death benefit is subject to be tax-exempt u/s 10(10)D.

What is the iSelect Smart360 Term Plan by Canara HSBC Life Insurance?

Five-year term insurance is a very specific short-term need. However, term insurance, which covers your family until your retirement, is an essential investment you should have. If you are looking to buy a short-term plan, then iSelect Smart360 Term Plan by Canara HSBC Life insurance can be considered. This is due to the host of features it offers. These are:

1. Flexible Payment Options:

In the iSelect Smart360 Term Plan, you are given full flexibility to decide the mode and frequency in which you will pay your premiums.

You can choose to pay your premiums either monthly, quarterly, or even yearly as per your convenience.

When opting for the Single Payment option, you can choose to pay a premium for the whole term plan once in a lump sum and enjoy the policy benefits.

2. Increase your Cover Within the Policy:

You could’ve bought a term plan when you were single. However, when you get married and have a child, you might want to increase your cover. Similarly, in situations when you need to increase your coverage, this is the plan to turn to

In this plan, you can increase your sum assured as you move forward with the policy. You can either choose to increase your cover annually or at certain special milestones such as marriage etc, according to the plan.

3. Option to Add your Spouse:

If you have taken the policy for yourself and later on want to include your spouse in the plan, you can do that too.

Also in the iSelect Smart360 Term Plan, adding a spouse will get your discount on the premium you pay.

4. Discounts on Premiums:

Apart from adding your spouse, discounts are also received if the life assured is a female. Also, the company provides loyalty discounts/ rebates of up to 5% for the existing customers of the company.

5. Tax Benefits:

Tax deductions under both sections 80C and 10(10)D are available in the iSelect Smart360 Term Plan

Conclusion

A 5-year term insurance plan is a smart and focused way to manage short-term financial uncertainties. It works best when you need coverage for a limited time but still want the peace of mind that your loved ones will be financially protected. From situations like taking care of a temporary loan, nearing retirement, or simply exploring life insurance options, this plan keeps things simple and affordable.

With flexible features and options like the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you can customize your policy to match your goals. We help you start small if needed, but make sure your protection never takes a back seat.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.