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.
