Life insurance premiums are expected to continue their decade-long decline next year, according to projections by the Insurance Information Institute, New York.

I.I.I. projects a 4% drop for 2007, in line with the average 5% per year drop beginning in 2000.

“The result is that, in 2006, premiums are less than half of what they were over a decade ago,” says I.I.I. economist and life insurance spokesperson Steven Weisbart.

Weisbart based his projections upon rates published on popular life insurance quote Web sites, along with calculations based on generally improved mortality, lowered cost of reinsurance, increased use of securitization by carriers to spread risks, and improved efficiency among life carriers.

Death rates for the 25-to-44 age group, the prime age range for buying life insurance, fell significantly over the past 10 years, he points out.

In 1996, the death rate per 100,000 for the 25-to-44 age group was 177.8. By 2004, it had dropped to 161.8, he notes, citing data from the National Vital Statistics Reports published by the Centers for Disease Control and Prevention, Atlanta. That was a decline of nearly 10% for the principal insurance-purchasing ages.

In 2007, a 40-year-old male nonsmoker buying a $500,000 20-year level term life policy would pay a premium of $615 if he qualifies as a standard risk and $340 if he meets the tougher requirements of a preferred risk, the I.I.I. estimates. Rates for women, younger people and for larger amounts of insurance would be lower.

In addition to term policies, I.I.I. expects premium rates for traditional whole life, universal life and variable universal life insurance to be lower next year. Premiums for those policies are shaped by expected investment returns in addition to life expectancies.

For financial advisors, the main point to be learned from the study is to focus on each client’s unmet life insurance needs and to point out that fulfilling those needs is more affordable than ever, Weisbart says.

“There are so many people who are underinsured,” he adds.

Falling insurance rates also suggest that for many people, rates may have fallen to the point where it will often pay to buy a new policy, Weisbart says. Despite the fact that they are older, those who own policies they bought more than 7 years ago may find it worthwhile to buy a new policy, he notes.

Buying one larger policy, rather than keeping an existing one and starting a second policy, would lower the client’s premium, he points out.

Another prime market for life insurance in a time of rate decreases are the 2.4 million grandparents who have grandchildren living in their homes, Weisbart observes. According to the U.S. Census Bureau, about one-third of them are raising their grandchildren with no parent at home to help them. Many are still working or have gone back to work to support their family.

Increased longevity carries a number of other implications for selling life insurance other than lower rates, he points out.

Key among them is the possibility that a policy owner’s survivors will need income for a great period of time. That means being underinsured may be a more serious concern than it was a couple of decades ago.

For example, it takes a $500,000 death benefit to pay a widow $2,500 a month for 17 years. Yet the average adult with life insurance aged 25 to 34 had only $145,000; and the average adult aged 35 to 44 had only $323,000 of insurance on his or her life, Weisbart says, citing recent LIMRA data.

Longer life spans are also increasing the numbers of older Americans who depend on their children for support. People now in their 30s may be responsible for caring for aging parents or grandparents, Weisbart points out.

“Try to break out of the traditional mindset about who needs to have life insurance,” he says. “The ideal would be to insure everyone who has responsibility for caring for someone.”