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All you need to know about 5-year term life insurance plans
Table of Content
Life is filled with ups and downs, and no one can escape them. Of course, there's a greater burden on the breadwinner of a family, because any financial crisis that hits them directly impacts other members. But what if the earning member loses their life in an untoward incident? In such a scenario, the dependents are most likely to crumble under pressure, especially if there’s no fallback. That’s exactly why it is critical to invest in a term life insurance policy.
While there are several options available, individuals can opt for a 5-year term insurance plan that offers coverage to the policyholder for a tenure of five years. Such plans cover the life assured for a period of 5 years. This layer of security is only extended if the policyholder ensures regular payment of premium. There are also some 5-year term plans that offer the option to convert the policy to a longer tenure after its expiry.
How does a 5-year term policy work?
The working of the 5-year term policy is pretty simple. The policyholder must commit to paying the premium regularly, as per the specified timelines, be it monthly, annually or in the form of single premium. The premium payment mode is chosen by the policyholder from the given options. In case the policyholder dies during the tenure of the policy, the nominees receive the death benefit. There’s no maturity benefit provided to the policyholder if they survive the tenure. However, certain term plans do offer the Return of Premium (ROP) option which allows the policyholder to reap the maturity benefit.
The benefits of a 5-year term insurance policy
Just like other insurance policies, the 5-year term life insurance plan is a great way for policyholders to secure their family, even in their absence. There are also some other benefits the plan offers:
- Risk protection for 5 years to the policyholder’s family
- Death benefit offered to the nominees, in case of death of the life assured during the policy term
- Income tax benefit under Section 80C of the Income Tax Act* as well as exemption from tax on the death benefit under section 10(10D)
- Option of adding a layer of security through several riders – Critical Illness rider, waiver of premium cover, accidental death cover, etc.
- Affordable premiums to ensure coverage, without emptying the pockets of the policyholder
Is there any way to calculate 5-year term life insurance premiums?
The premium is calculated based on several factors, including the age of the policyholder, annual income, sum assured, medical history, and habits that include smoking, drinking or chewing tobacco. If someone has greater health risk, the premium may be higher accounting for potential consequences in the long run.
FAQs
1. Can anyone avail the 5-year term insurance plan?
Anyone who falls under the bracket of 18-65 years can go for this policy.
2. Can policyholders opt for riders with a 5-year term insurance plan?
Yes. Different service providers offer riders that can offer an added layer of protection on top of the term plan.
3. How can one cancel the 5-year term insurance policy?
You could reach out to your insurance company and let them know your decision in writing. You will need to submit the prescribed form for cancellation after which the insurance company will complete the cancellation process. Alternatively, you can stop paying premiums. After a certain grace period, your coverage also lapses. However, one cannot get any refunds of premium if the policy is cancelled outside the prescribed cooling / free look period.
Related Articles
- What is a Passive Income? Why Should You Use It to Buy a Term Plan?
- How to Choose the Right Term Policy Period?
- Term Insurance for NRI
- What Does Happen to Your Term Insurance Plan Post-Divorce?
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
Written By:
Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
Reviewed By:
Here are a few more articles about Term Insurance.
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HDFC Life
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HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER
We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.
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##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.
#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved
^ Available under Life & Life Plus plan options
*As per Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
***Online Premium for Life Option for HDFC Life Click 2 Protect Super (UIN: 101N145V04), Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).
**7% online discount available on 1st year premium only
~Tax benefits of ₹ 54,600 (₹ 46,800 u/s 80C & ₹ 7,800 u/s 80D) is calculated at highest tax slab rate of 30% on life insurance premium u/s 80C of ₹ 1,50,000 and health premium (Critical illness rider) u/s 80D of ₹ 25,000. Tax benefits are subject to conditions under section 80C, 80D, 10(10D) as per Income Tax Act, 1961. Please consult your tax advisor for more information.
ARN - ED/05/23/1811