Guide to 5-Year Term Life Insurance
See affordable life insurance quotes from PolicyMe and other top companies.
TL;DR: Is a 5-year life insurance term right for me?
A 5-year life insurance policy may be the right term length for you if:
- You expect to retire within 5 years
- You have a mortgage or other major debts that will be paid off in 5 years
- Your children will be financially independent within 5 years
A 5-year term life insurance policy isn’t for everyone, but it can be a great way to avoid paying for more coverage than you need if your financial obligations are short-term.
5-year term life insurance rates in Canada
The cost of a term life insurance policy can vary considerably based on your age and coverage amount. While a 5-year term may be as little as $10 a month or less if you’re under 35, even small amounts of coverage can carry higher premiums for applicants in their 40s and beyond.
Here’s a look at average 5-year term life insurance rates in Canada by coverage amount, based on publicly available figures for 35-year-old female non-smokers.
Remember: 5-year terms are best for short-term debts and financial protection that you only need for a short period of time. Consider carefully whether your expected life insurance premiums are a good price for that short-term security.
The price of a 5-year term also depends heavily on the size of the death benefit you select for your beneficiaries. The amount of coverage you buy should reflect your loved ones’ expected financial needs in the event of your death. Even with temporary coverage, your policy’s payout should be able to cover your debts, your children’s education (if any), and replacement of your income for any dependents, including your spouse.
“To keep premiums low and still get meaningful protection, buy the amount of coverage your family would truly need for things like the mortgage, education, and living costs. Apply early while you’re young and healthy, since that’s when rates are lowest and you can lock them in for your full term.” — Jeremy Burbano, Life Insurance Advisor
Who should choose a 5-year life insurance term?
If you find yourself in one of the following situations, you may want to request life insurance quotes for a 5-year term policy. Note that PolicyMe does not offer 5-year terms, only 10, 15, 20, 25, and 30-year terms.
- You have young children
- Your mortgage payments will last for more than 5 years
- You don’t have any dependents
- Your expected premium payments outweigh the policy’s potential payout
A 5-year term is one of the shortest term lengths available from most Canadian life insurers. If you’re considering such a short term, it’s also worth considering that you may not need life insurance at all. Depending on your situation and the premiums you’re eligible for, you could be better off investing the funds to provide for your final expenses and offer financial security to your family.
Be wary of relying entirely on workplace group coverage. 50% of Canadians say some form of their life insurance coverage came from a group plan, according to PolicyMe’s 2026 Life Insurance Gap Report. But in most cases, workplace coverage will end when you retire. Even with a group plan, it’s unlikely that the payout from a workplace policy would match what your family needs. A 5 or 10-year plan could help provide peace of mind and bridge the gap if you’re nearing the end of your career but still have debts and dependents.
How to choose a term length: 5 vs. 10 years
A 5-year term life insurance plan isn’t right for everyone. When choosing between term life insurance coverage options, keep the following factors in mind:
- Length of financial responsibilities: When do you expect your children or other dependents to be financially independent? When will your mortgage be paid off? Pick the term length that’s closest to your financial goals without undershooting.
- Affordability: Your annual premiums will be lower for a shorter life insurance term.
- Laddering: If you expect some of your financial obligations to significantly outlast others, buying a 5-year term policy alongside a separate policy for a longer term can help you stack the right coverage amounts against your changing financial situation.
- Eligibility: Depending on your age, you may not be eligible for longer terms without purchasing a permanent life insurance product. But if you’re looking for short-term life insurance without a cash value component, a permanent policy may not be the best fit.
How to choose a coverage amount
If you pass away while your term policy is active, term life insurance pays a tax-free lump sum to your loved ones upon your death so that you don’t leave them with undue financial burdens. But just how big does that lump sum need to be?
In general, you should buy enough life insurance to cover your debts, your income, your mortgage payments (if any), and your children’s education (if any). Adding these basics up can give you an estimate of the coverage amount you need to buy. You can also use PolicyMe’s free online life insurance calculator to see a range of coverage amounts that might fit your family’s financial needs.
Riders and options (and when they’re worth it)
In addition to the basic coverage included in your term life insurance policy, you may be able to add certain riders or endorsements to your policy:
- Convertibility rider: Allows you to convert a term life insurance policy into a permanent life insurance policy (such as a term-to-100 policy) and get lifetime coverage.
- Accelerated death benefit rider: Allows you to access some of your death benefit early if you’re diagnosed with a terminal or critical illness.
- Child rider: Provides term life insurance for your children.
- Return of premium (ROP) rider: Returns all of the insurance premiums you paid over your policy term if you outlive the policy.
- Guaranteed insurability rider: Allows you to buy more coverage in the future without the need for updated underwriting (including medical exams).
Riders may sound good, but they typically add to the cost of your policy without offering much additional value. All PolicyMe term life insurance policies include two of these benefits at no added cost: $10,000 of child life insurance coverage and the option to convert to a permanent policy later on.
What happens when the 5-year term ends?
When your 5-year life insurance term ends, your coverage will end, too.
If you do nothing, one of two things may happen depending on your policy’s structure:
- Auto-renewal: Some term policies are set to auto-renew yearly upon expiry. This means you will be issued a new rate and your coverage will refresh every year until you cancel.
- Lapse: Some term policies will naturally expire when the term ends if you take no other action. It’s okay to let your policy lapse if you don’t need coverage any longer.
If you still need coverage, you may be able to extend the term, convert to permanent, or purchase a brand new policy:
- Extend: You can either set up yearly renewals if you want to take it one year at a time. You can also extend your initial 5-year term for longer coverage, like a 10-year term.
- Convert: Depending on the policy you chose, you may have the option to convert your coverage into a permanent policy without a new medical exam.
- Buy another policy: It’s more expensive to buy a brand new policy, but it’s an option if you cannot renew or extend. This can allow you to access different types of life insurance, such as universal or whole life, if your needs have changed.
Renewal and conversion may be built-in features of some policies. For instance, some providers like PolicyMe set their term policies to auto-renew yearly after expiry until age 85. Conversion to a longer term may also be a built-in option. PolicyMe allows you to convert to a longer policy with no new medical evidence within the first 5 years. Check your policy language closely to see whether auto-renewal or expiry is the default auction. You can simply allow your coverage to lapse if you don’t need term coverage anymore, or cancel it anytime with no fees (with PolicyMe).