Ben Nguyen 
5-year term life insurance is one of the most popular types of temporary life insurance coverage purchased by Canadians. With guaranteed premiums and death benefit payouts for five years, it provides affordable financial protection for your family during short-term needs or as a supplement to permanent policies.
This guide will examine 5-year term life insurance specifically within the Canadian context. We’ll review the key features and benefits, costs, top providers in Canada, who needs coverage, and tips for purchasing the right policy. Whether you’re considering term insurance for the first time or looking to optimize your current coverage, use this guide to gain expertise in 5-year term life insurance.
What is 5-Year Term Life Insurance?
Definition & Overview
A 5-year term life insurance policy provides a guaranteed death benefit payout to designated beneficiaries if the insured person passes away within a 5 year coverage term. The policy cannot be cancelled by the insurer during the 5 year period, even if health conditions develop.
At the end of the initial 5-year term, the policy owner has the option to renew for another 5 years. Renewability continues until an age limit, usually 75 to 80 years old depending on the provider. Premiums often increase upon renewal as the insured ages.
The death benefit provides tax-free funds to pay funeral costs, debts like mortgages, daily living expenses and more. This can help protect families from financial hardship if a wage-earning spouse or parent dies prematurely.
Key Features
Some key features of 5-year term life insurance policies in Canada include:
- Guaranteed Level Premiums: Premiums remain fixed for each 5-year term.
- Guaranteed Coverage: The insurer cannot cancel the policy or change terms during a 5-year period.
- Death Benefit Payout: Provides lump-sum payment to beneficiaries if death occurs within a term.
- Renewability: Policies can be renewed until age 75 to 80 with higher premiums.
- Conversion Options: Ability to convert to permanent insurance with no medical underwriting at renewal.
- Living Benefits: Some policies offer advanced payouts for terminal illness diagnosis.
Policy Options
5-year term policies are available in both individual and group formats in Canada:
- Individual Policies: Coverage is customized for a specific person’s needs. Ideal for primary income earners.
- Group Policies: Offered through employers, associations, unions etc. More standardized but with lower group rates.
- Mortgage Life Insurance: A decreasing term policy to pay off the remaining mortgage loan balance if you die before the mortgage is fully paid off.
Why Do Canadians Buy 5-Year Term Life Insurance?
5-year term life insurance serves several common needs for Canadian families:
Mortgage Protection
With approximately 66.5% of Canadian households owning their home (in 2021), a 5 or 10-year term policy provides affordable mortgage protection. This ensures the mortgage balance gets paid off if you pass away before building home equity. (source: https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921b-eng.htm)
Income Replacement
The death benefit can help replace lost income from the primary earner’s salary to maintain the dependents’ standard of living. This income protection is especially important for young families.
Final Expenses
At a minimum, the death benefit can pay funeral costs, unpaid medical bills, and other final expenses so loved ones are not left with these burdens.
Temporary Needs
The lower premiums make 5-year term life insurance affordable for short-term needs like covering a car loan, paying for childcare costs, or saving for college tuition.
Advantages of 5-Year Term Life Insurance
There are several advantages that make 5-year term insurance policies a popular choice in Canada:
Lower Cost
Term life insurance premiums are significantly lower compared to permanent life insurance. Guaranteed periods of 5 or 10 years provide an affordable way to meet temporary insurance needs.
Easy Underwriting
Policies up to $500,000 can often be purchased with simplified underwriting by answering a questionnaire with no medical exam required. This allows Canadians to obtain coverage quickly and easily.
Customizable Coverage
You can choose your own coverage amount based on specific financial needs and beneficiaries. Individual policies allow you to customize details.
Financial Protection
The death benefit provides assured financial protection for a partner, children, or other dependents if the insured person dies unexpectedly during the 5-year term.
Conversion Options
Converting to permanent insurance when renewing the term policy allows you to lock in lower premiums for lifelong coverage while young and healthy.
Disadvantages of 5-Year Term Life Insurance
Some drawbacks to consider include:
No Accumulating Cash Value
Term life insurance only pays out if you die within the term period. There is no cash value accumulation as with permanent life insurance.
Coverage Ends
At the end of each 5-year term, the coverage ends unless you proactively renew the policy and continue paying higher premiums as you age.
No Residual Value
If you outlive the term, the insurance provides no residual value. The previous premiums paid are not reimbursed.
Rising Premiums
Premium costs increase each time you renew the term as you enter a higher age band, whereas permanent policy premiums are fixed.
Requalification Required
You may need to re-qualify with medical underwriting when renewing, which can be denied due to health changes as you age.
5-Year Term Life Insurance Cost in Canada
The cost of 5-year term life insurance depends on several key factors:
Age
Younger ages qualify for lower premiums, as mortality risk increases as you age. Rates start rising around age 40 and increase more sharply at age 50 and beyond.
Gender
Due to differing life expectancy, premium rates are lower for women than men at younger ages but even out by the 50s and 60s.
Health
Any medical conditions you have, or lifestyle risks like smoking or high risk occupations will result in higher premiums compared to healthy individuals.
Coverage Amount
The higher the death benefit you purchase, the higher the required premiums to fund the policy.
Term Length
Premiums are lower for shorter 5 or 10-year terms compared to longer 15, 20 or 30-year terms.
Here are sample monthly costs for 5-year term life insurance by age and coverage amount:
| Age | $250,000 Coverage | $500,000 Coverage | $1,000,000 Coverage |
|---|---|---|---|
| 25 | $16 | $27 | $48 |
| 35 | $19 | $33 | $60 |
| 45 | $30 | $50 | $90 |
| 55 | $100 | $160 | $280 |
| 65 | $195 | $310 | $540 |
Premiums quoted are for a non-smoking male with no pre-existing health conditions. Adding health risks or choosing longer terms would increase these costs.
Provincial Differences
Premiums can also vary slightly by province. Rates are generally most affordable in Quebec, followed by Ontario, with Manitoba and Atlantic provinces being more expensive.
Read more: Strategies for Lowering Your Term Life Rates
5-Year Term Life Insurance Providers in Canada
When shopping for 5-year term life insurance, these are some of the top national life insurance providers in Canada to consider:
Sun Life Financial
- Renewable terms until age 85
- Add riders for critical illness & disability
- Available through advisors & brokers
- Digital tools for management & claims
Read full review: Sun Life Insurance Canada
Canada Life
- Convert to permanent coverage up to age 70
- Rates locked in for ten years
- Access through independent brokers
- Solid financial strength rating
Read full review: Canada Life Insurance
RBC Life Insurance
- Low rates starting from $10/month
- Bundle with home & auto policies
- Underwriting can be completed by phone
- Well-rated for claims-paying ability
Read full review: RBC Life Insurance
BMO Insurance
- Fully online application process
- Term rates are guaranteed for 15 years
- Renewals until age 75
- Living Benefits for terminal illness
Read full review: BMO Life Insurance
Manulife Financial
- Individual & mortgage term options
- Can add critical illness & disability riders
- Digital tools and fast online quotes
- Competitive premium pricing
Read full review: Manulife Life Insurance
When comparing providers, look at premium rates, underwriting process, ability to bundle with other policies, online servicing capabilities, and financial strength ratings. An independent broker can help you find the best option for your specific situation.
Who Needs 5-Year Term Life Insurance?
Here are some of the most common situations where 5-year term insurance is recommended in Canada:
Newlyweds & New Parents
If you’ve recently gotten married or had a new baby, term life insurance provides income protection, pays off a mortgage, and covers costs if you or your spouse dies unexpectedly.
Primary Wage Earners
If your family is relying on your income to maintain their lifestyle, term life insurance can help replace that income if you pass away prematurely.
Mortgage Holders
Anyone with an outstanding mortgage can benefit from a term policy to pay off their remaining mortgage debt and keep the home if they die within the term period.
Business Partners
Partners or shareholders in a company may take out policies on each other to protect from financial losses. The death benefit helps fund a buyout or replace lost contributions to the business if your partner dies.
Debtors
Whether it’s credit cards, car loans, personal loans or student debt, the death benefit can wipe out balances owed so that dependents or cosigners aren’t left responsible for the deceased’s debts.
How to Buy 5-Year Term Life Insurance
Follow these key steps when purchasing a 5-year term life policy:
Determine the Right Coverage Amount
Consider all expenses you want to cover, debts like mortgages, income replacement needs, and existing assets and insurance. This will tell you how much coverage to buy.
Get Quotes From Insurers or Brokers
Reach out to insurers directly or use a broker to get personalized quotes. Compare rates from at least three providers.
Complete the Application Process
You’ll answer detailed questions about your health, family history, occupations, hobbies, and other lifestyle factors.
Undergo Medical Underwriting
This may involve a doctor’s exam, bloodwork, and requesting medical records depending on your age and coverage amount.
Receive a Policy Offer
If approved, you’ll receive a policy offer to review terms, confirm beneficiaries, and sign to move forward.
Submit Your First Premium Payment
This payment activates the policy. Make sure to pay all future premiums on time to keep the policy active.
Where to Buy 5-Year Term Life Insurance
There are several options to purchase 5-year term life insurance coverage:
Directly From Insurers
You can buy policies directly from major insurance companies like Sunlife, RBC Insurance, and Manulife through their website or by calling their sales team. This allows you to get quotes and apply entirely online or over the phone.
Through an Independent Insurance Broker
Independent brokers can shop rates from a large network of insurers to find you the most competitive pricing. They also provide personalized advice on the right policy and coverage for your needs. Most offer online quotes as well.
Via Affinity Partners
Some employer or association group plans include access to discounted group term life insurance rates. Alumni organizations, credit unions, and other membership groups may also partner with insurers to offer special pricing.
Using an Online Insurance Brokerage
There are various online insurance platforms that allow you to compare quotes from multiple insurers through a single application process. This offers convenience and makes it easy to compare rates.
Tips for Buying 5-Year Term Life Insurance
Follow these tips when purchasing 5-year term life insurance:
Determine the Right Coverage Amount
Consider all debts, income to replace, funeral costs and other expenses you want covered by the death benefit. Also, it is a factor in existing life insurance and assets.
Compare Premium Rates
Shop policies from at least 3 of the top providers in Canada to make sure you get the most competitive premium pricing. Get quotes online or from a broker.
Lock In Young, Healthy Rates
Buy your initial policy when young and healthy to secure the lowest premiums. Rates increase as you age and renew terms.
Understand Conversion Options
Ask about converting to permanent insurance down the road so you can lock in lifetime coverage without new underwriting.
Consider Term Riders
Add on riders for critical illness coverage or disability income to enhance your protections.
Review Financial Strength Ratings
When selecting an insurer, review ratings from firms like A.M. Best that assess the company’s financial strength and ability to pay claims.
Bundle for Added Savings
You can often save more when bundling your term life policy with home, auto or other insurance policies from the same provider.
Making a Claim on 5-Year Term Life Insurance
If faced with having to make a death benefit claim, here is the process:
Documentation Needed
- A certified copy of the death certificate
- The original policy contract
- Personal identification for beneficiaries
Completing Claim Forms
The beneficiaries or executor will need to complete claim forms and authorization for the insurer to access medical records as part of assessing the claim.
Review and Investigation
The insurer will review the claim information, confirm the validity of documentation, pull medical records, and investigate any discrepancies.
Payment Issued
Once approved, the death benefit will be paid out to designated beneficiaries as a tax-free lump sum. This is typically within two weeks.
The simplified claims process is one benefit of purchasing coverage from a top rated insurer. Reputable providers have experience managing claims quickly and compassionately.
There are also longer-term options to consider. Read our valuable articles about Term 10 life insurance, Term 20 life insurance, Term 30 life insurance, Term 40 life insurance, Term 25 life insurance, and Term to Age 65 life insurance to understand the differences in cost, coverage duration, conversions, and best uses for each policy term length.
Conclusion
5-year term life insurance offers affordable, guaranteed protection during short-term needs like mortgages, young families, and debt coverage. It provides invaluable financial security if you pass away prematurely. While premiums increase at renewal, term life gives Canadian families the protection they can count on. Shop rates from leading insurers, purchase at a young age and consider conversion options for lifelong coverage. With this guide, you can make informed decisions about 5-year term life insurance to protect those who matter most.
If you are ready to get covered, visit lifebuzz.ca to start a free quote comparison and find the most affordable 5-year term life insurance policy for your needs.
At Life Buzz , you can easily compare quotes from Canada’s top insurers and work with our advisors to understand your coverage options. We’re here to provide unmatched expertise and help you gain financial peace of mind.
Frequently Asked Questions
What medical tests are required for 5-year term life insurance?
For policies under $500,000, you may only need to complete a questionnaire if you are under age 50. Over $500,000 or age 50+ may require a paramed exam, bloodwork and doctor records.
Why is 5-year term life insurance cheaper than permanent insurance?
Term life premiums are lower because the policy only pays out if you die within five years. Permanent insurance lasts your entire life, so premiums are higher.
When should I renew my 5-year term life insurance policy?
You'll receive a renewal notice before your term expires. Renew at least 30 days in advance to avoid a lapse in coverage. You can renew until age 75-80 depending on insurer.
Can I convert my 5-year term life policy to permanent insurance?
Most term life policies allow you to convert to a permanent life insurance policy within a conversion period, often 10-15 years from the issue date, without new underwriting.
Do 5-year term life insurance premiums go up every renewal?
Yes, premiums increase at each 5-year renewal as you enter a new age band. Renewing young and healthy keeps premiums lower over time.
Is a medical exam required to renew 5-year term life insurance?
You may need to provide an updated medical history or undergo new underwriting at renewal. Good health keeps renewal costs lower.
Can I renew my 5-year term policy after age 75?
Most insurers stop renewals at 75-80 years old. Some allow renewals to age 90 but with significantly higher premiums.
How long does it take to get approved for 5-year term life insurance?
Approval can take 1-2 weeks with simplified underwriting. It may take 4-6 weeks if a full medical exam and records are required.
Can I get a 5-year term life insurance quote online?
Yes, you can get quotes on insurer websites or use online insurance brokers to compare rates from multiple companies.
Who needs to be my beneficiary for 5-year term life insurance?
You can name any person or entity as your beneficiary. Common choices are spouses, children, parents, trusts, or charities.
What conditions disqualify you from 5-year term life insurance?
Serious conditions like cancer, heart disease and stroke may disqualify you from term life insurance or lead to higher premiums.
Can I renew my 5-year term life policy if I develop a health condition?
As long as you continue paying premiums, the insurer cannot cancel your term policy even if your health declines.
Is a 5-year term life insurance payout taxable income for beneficiaries?
No, life insurance death benefit payouts are not considered taxable income. Beneficiaries receive the full payout tax-free.
Can I get 5-year term life insurance after age 65?
It becomes difficult to qualify after 65 due to age and health. Some final expense policies are available but with higher costs.
Is there a grace period if I miss a 5-year term life premium payment?
You usually have a 30-day grace period after a missed payment before the policy lapses. Make sure to pay before the grace period ends.
Can I deduct 5-year term life insurance premiums from my taxes?
Unfortunately, term life insurance premiums are not tax deductible in Canada, unlike some permanent cash-value life insurance policies.
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