State Farm is the largest insurer of autos & homes in the USA by far, with lots of local State Farm agent offices in almost every community across the nation. In fact, there are TWO State Farm agent offices within a mile of my home, and over a dozen State Farm offices within 10 miles of me. State Farm is a well-known household name when it comes to insurance. But is State Farm a good choice for life insurance? State Farm may be a good choice for auto & home insurance, but as this review will show you, State Farm’s rates for life insurance are expensive, compared to other highly rated major life insurance companies. There are other drawbacks to using a State Farm agent for your life insurance. An independent insurance agent or agency, representing many life insurance companies, specializing in life insurance, is usually a better choice to find the best life insurance for your needs. The review below will explain why I think this is the case.
Why is State Farm not a good choice for life insurance?
Many of the major auto & home insurance companies — State Farm, Allstate, Farmers, American Family, Liberty Mutual, Nationwide Insurance — want their agents selling as much life insurance as they can. Many of these companies encourage their agents to obtain the LUTCF (Life Underwriter Training Council Fellow) designation, by completing a series of training courses in life insurance sales. Although it’s a good idea to choose an agent committed to increasing their professional knowledge, the LUTCF courses mainly help agents sell more policies, not inform agents on how to help consumers make the best life insurance choices.
For example, agents almost always recommend permanent life insurance as a better choice, if a person can afford the premium. The agent may explain how the life insurance cash value will accumulate, and can be used to supplement retirement savings. But the advantages of the cash value with permanent life insurance take decades to be realized, with most people cashing in their policies early, paying surrender charges, and losing money. What also can make permanent life insurance a bad deal for most people, is the money used to pay for it is often better spent elsewhere, such as to increase retirement savings or pay off debt, such as credit cards. In my opinion, no one paying double digit interest on credit card or other debt, should buy permanent life insurance because it accumulates cash value. However, most agents won’t ask you about your debt, if they think you can afford the monthly premium to “over-fund” a permanent life insurance policy.
State Farm agents can’t shop the market for the best life insurance products for you.
State Farm agents are good at auto and home insurance, which takes up most of their time, but even if they have a professional life insurance designation, like the LUTCF or CLU (Charter Life Underwriter), most of them are not experts on life insurance, and have only a basic knowledge of life insurance, based on their experience. Being good at auto & home insurance is a full time job, and being good at life insurance is another full time job. Companies like Allstate Insurance realize the need to specialize, which is why Allstate has life insurance specialists available to work with their agents. However, in spite of having life insurance specialists, I don’t consider Allstate a good choice for life insurance, either, for most of the same reasons as State Farm.
If there are State Farm agents very knowledgeable in life insurance, they still have limited options to help you. For example, you may have a conversation with an agent, and determine a type of permanent life insurance called Guaranteed Universal Life (GUL) is best for you, which is basically a low cost “term for life’ insurance policy, more affordable than other types of permanent insurance. The cost, and ability to qualify for it, can vary a lot among companies. A good independent life insurance agent can really shop the market for you, and find you the best Guaranteed Life Insurance policy for your situation. A State Farm agent can offer you only the few companies State Farm allows the agent to offer, and possibly only State Farm. The State Farm agent may be stuck offering you State Farm term life insurance or State Farm Whole Life Insurance only.
You are not likely to be eligible for State Farm Life Insurance if you or your family have health issues.
State Farm, and many of the insurance companies better known for their auto & home insurance, are not flexible with common health conditions. If, for example, you are taking medication for depression, or diagnosed as diabetic, State Farm is not likely to insure you. The advantage of working with experienced independent life insurance agents or agencies, is they know the companies in the life insurance market. Some companies, like Prudential, may sell life insurance at competitive rates to diabetics showing stable management of their condition. Other life insurance companies insure & have better rates for the obese. Some life insurance companies rate the occasional cigar smoker at non-tobacco rates. State Farm agents don’t have the option to work with other life insurance companies, so if State Farm says you do not qualify for their life insurance, the State Farm agent can’t help you.
State Farm Term Life Insurance is too expensive
Most people need term life insurance, and term life insurance, if your & your family’s medical history have no issues, is simple enough a State Farm agent can take care of your needs. However, State Farm’s term life insurance rates are expensive compared to other major life insurance companies.
For example, a 34 year old male non-smoker, qualifying for standard plus rates, for a $500,000 twenty-year term life insurance policy, would pay $545 annually with State Farm (per the State Farm website), but would pay only $410 a year with Banner Life Insurance Company. In fact, there are 28 life insurance companies with a lower rate than State Farm, many of them with A+ financial strength ratings with AM Best. State Farm Life Insurance Company is rated A++ for financial strength with AM Best, but you pay a lot more for that extra “+.” Change the policy from a twenty year term, to a thirty year term policy, and State Farm is $890 a year, and Columbus Life Insurance Company is only $635 a year, with 11 companies having a rate $100 or more lower than State Farm, including well-known life insurance companies like Prudential, AAA Life Insurance Company, and Transamerica. Here are some other examples:
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A 44 year old male non-smoker, qualifying for standard rates, for a $500,000 twenty-year term life insurance policy, would pay $1,430 annually with State Farm, but would pay only $1,035 a year with Transamerica Life Insurance Company.
A 36 year old male non-smoker, qualifying for preferred rates, for a $100,000,000 twenty-year term life insurance policy, would pay $790 annually with State Farm, but would pay only $615 a year with Ohio National Life Assurance Corporation.
A 56 year old male non-smoker, qualifying for standard plus rates, for a $250,000,000 twenty-year term life insurance policy, would pay $1,710 annually with State Farm, but would pay only $1,252.50 a year with Columbus Life Insurance Company.
State Farm Life Insurance Review Summary
If you are in good health, only need term life insurance, and prefer to pay more to insure with a life insurance company with the highest AM Best financial strength rating of A++, State Farm might be a good choice for you. Other State Farm life insurance products such as Whole Life, should definitely be compared with several other companies, including consulting an independent life insurance agent specializing in permanent life insurance coverage. Some other life insurance companies with the highest AM Best financial strength rating of A++, are New York Life Insurance Company, TIAA-CREF Life Insurance Company (for educators), Northwestern Mutual Life Insurance Company, Guardian Life Insurance Company, & Massachusetts Mutual Insurance Company.
If you want a reputable & financially sound life insurance company, competitively priced rates, the proper type of policy for you, and a smooth process buying the coverage you need, comparison shop with a few agents & agencies, so you can find an agent offering the best life insurance options for you at a low price. Life insurance can be adjusted to fit any person’s budget, & a good agent can make getting it easy for you. Saving money by finding lower auto & home insurance rates can help you have the extra money you may need to buy the right amount of life insurance for you. Don’t forget to shop your home & auto insurance each year with all the leading companies. Regardless of your driving record or situation, you will find some companies charge twice as much — or more — than others.
As with auto & home insurance, you’ll see some life insurance companies charge more than double the price of other companies for the same coverage. No single life insurance company has the best rates for everyone.
For more information, I surveyed, in these reviews, the companies with the best term life insurance rates, which you can use to help you shop and find the life insurance coverage you need at the lowest rates.
What do you think about this review of State Farm’s life insurance? Comment or ask me questions on my facebook page. Follow me on Twitter for important insurance consumer news & new blog entries at CarInsWatch.