5 Year Term Insurance Policy - Features & Benefits You Should Know

Written by : Knowledge Centre Team

2025-12-05

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Your expenses, throughout your life, follow a cyclical trend. They vary depending on life’s circumstances and different milestones that are reached.

For example, your child has secured admission to a top-notch Indian or international university, and you have taken out a huge loan to finance their education. Although repayments typically begin post-completion of the programme, most banks expect payment of interest during such “moratorium” periods. This repayment can spike your expenses at least until your child secures stable employment.

There could be similar intermittent expenses, such as a car loan or wedding expenses etc. When you are in stable employment, you can easily manage your finances. However, in case of the policyholder’s unfortunate absence, a term insurance plan will be a shield for the family against financial distress.

Key Takeaways

A 5-year term insurance plan is ideal for short-term coverage needs.
It offers affordable premiums with significant financial protection.
Suitable for temporary financial obligations like short-term loans or career transitions.
Offers flexibility to enhance coverage with riders like critical illness or accidental death.
Return of premium options can provide value if no claims are made.

What is a 5-Year Term Life Insurance Policy?

The 5-year term life insurance policy is a short-term version of the typical long-term life insurance plan. Term life insurance is typically a long-term financial protection cover for your family, which can have a tenure of over 40 years.

A term life insurance plan is a pure protection plan that offers a benefit amount to your nominees upon the policyholder’s untimely demise. Any unfortunate event can be stressful for the family, both emotionally and financially. If the policyholder is the primary breadwinner, the family would require a financial cushion to rely on.

A term insurance plan helps your family continue with their lives and manage their financial position. This plan secures an adequate sum assured for your family at a nominal premium cost.

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What are the Primary Features of a 5-Year Term Life Insurance?

A 5-year term life insurance works the same as the standard term insurance plan. However, the cover is only available for a short period. It is also a reason why both plans have similar primary features. Some of the salient features of a 5-year term plan are:

Sum Assured: You can have a small 5-year term life cover, ranging from ₹5 lakh to ₹25 lakh.
Premium Payment Approach: You can avail of the cover with a single premium payment. The short tenure and low sum assured allow for a lower premium cost. Thus, the policy remains affordable even with a single premium option.
Additional Covers: The short-term life insurance plan may allow only accidental death and accidental total and permanent disability cover as riders. No other added benefits will be available with a 5-year term life insurance plan.
Death Benefit Payment: The plan pays the death benefit as a lump sum only.
Bridge to Long-term Plans: While you may invest for a short-term, like 5 years, it allows a sufficient amount of time to assess your future financial position and risk capacity. Consequently, you can also map out your long-term plans.

Why Should you Buy a 5-Year Term Life Insurance Plan?

A 5-year term life insurance policy covers you for a period of five years. These plans are appropriate for individuals who have financial commitments and have dependents who would require financial support in case of an unfortunate event. The death benefit of a 5-year term plan can ensure a financially stress-free life for the family.

Individuals approaching mid-life can also buy this policy, provided they are medically fit to be offered a term life cover. Individuals with limited or lower levels of income can also buy this insurance plan because the premium is lower compared to whole life plans or longer-term plans.

What are the Top Benefits of 5-Year Term Insurance Plan?

Some of the benefits of 5-year term plans are listed below:

Death Benefit: If the insured unfortunately passes away during this term period, the nominee will receive the sum assured, which is generally higher than the sum assured offered by traditional plans.
Income Tax Efficiency: Investments in insurance policies are deductible under Section 80C from taxable income. This, in turn, increases taxable income, supporting financial planning.
Additional Riders: Policyholders can choose to avail of extra cover by adding additional riders to their plan, enhancing protection to meet their individual requirements.
Low Premiums: 5-year policies are affordable as premiums are lower than of whole life and longer-term policies. Flexible modes of payment and additional discounts make these policies lighter on the wallet.
No Market Risk: Unlike other market-linked term plans, these fixed plans have no investment component that could lead to any losses.

5-Year Term Plan Vs Standard Term Insurance Plan

The 5-year term life insurance plan differs from the standard term insurance plan to the extent of its usage. The following table provides the details:

Parameter	5-Year Term Plan	Long Term Plan
Tenure	5 years	10 years to 99 – Age at purchase
Useful for	Short-Term Financial Obligations	Corpus for Family to Maintain Lifestyle
Premiums	More affordable as compared to a long-term plan	Premium increases with tenure
Create Inheritance	Usually not meant for this	Useful to create an inheritance
Death Benefit	Can be limited to the covered specific financial obligation/liability	Should be at least 10 times the annual income of the insured

How to Buy the Best 5-Year Term Plan?

A sum assured equal to 10 times your annual income is usually sufficient for this purpose. However, in the case of a 5-year term life insurance policy, it will help you secure your family from a short-term liability. For example, a 5-year loan for home improvement. Thus, you should check for certain specific features of such a plan that can help look after your objective of buying short-term life insurance:

Existing Liabilities: Check if you have considered all the liabilities you want to cover, and none of them will last longer than the cover. It will be painful for you to think of our loved ones bearing the debt burden without adequate support. A 5-year term plan can help pay off such liabilities that may be due in the short term.
Riders: Does the policy offer add-on riders for covering contingencies which can affect your earnings? A terminal illness, permanent disability or accidental death are such events you want the policy to cover over and above the base sum assured.
Claim Settlement Ratio: This ratio helps you judge whether the insurer has a track record of settling claims. The insurer may be offering the term plan at affordable rates, but if its claim settlement ratio is low, then it is not the right company for you. A claim settlement ratio above 90% is considered a decent ratio in the market.

You can buy the 5-year term life insurance online or offline once you are satisfied with the above parameters.

Final Takeaway

A 5-year life insurance plan is best-suited to meet short-term financial obligations. However, you should also consider having a standard term life cover for your family. It will help offer adequate cover for your dependents with the amount necessary for maintaining their living standards and meeting their goals.

At Canara HSBC Life Insurance, we offer flexible term plans, which allow you to customise your cover, add your spouse, and even opt for return of premium benefits. Backed by a consistently high claim settlement ratio of 99.4%, you can trust us to stand by your family when it matters most. In fact, our online support channels are easily accessible, along with 15,700 partner branches for offline visits.

Make short-term protection a long-term advantage by choosing a partner who values your trust and future.

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.