State Farm Life Insurance: An Independent Agent’s Review
People are often surprised to learn that there are actually many other insurers out there offering better rates and better coverage than State Farm. We hate to give a negative review, but we take it as our responsibility to educate clients and keep their best interests at heart.
JRC was founded by a group of experienced life insurance agents who worked for the biggest names in the industry and wanted to create a different kind of life insurance experience—one with no sales quotas, no corporate politics, and no commission-driven product pitches. With that, here is our review of State Farm life insurance.
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State Farm Illusions vs. Facts
The State Farm brand is instantly recognizable and, in many ways, respectable. They are one of the top home and auto insurers in the U.S., providing reliable coverage to millions of Americans. However, it’s important to recognize that State Farm has marketed itself into prominence.
Every year State Farm spends almost a billion dollars a year on their advertising. Those Super Bowl commercials don’t come cheap, and this cost is trickled down to people who purchase their products.
Illusion
State Farm is the largest life insurance company in the United States.
Fact
With almost 58,000 employees, there’s no denying that State Farm is a very large company. However, that number doesn’t even land the insurer among the 100 largest employers in the United States.
Most importantly, the vast majority of State Farm’s customers purchase home and auto insurance, not life insurance. The “Like a Good Neighbor” jingle rings truer on TV than in real life.
Illusion
State Farm is the best insurance company.
Fact
According to the National Association of Insurance Commissioners (NAIC), State Farm owns less than a 3 percent market share in life insurance. Many consumers are able to find better and more affordable options, and while naming the “best” insurance company is impossible, many rankings from various sources show State Farm to be far from it.
Illusion
State Farm has been around the longest.
Fact
State Farm was founded in 1922. Many other life insurance companies have been around for 100 to 200 years. Prudential, for example, was founded in 1875. The Hartford was founded in 1810!
Illusion
State Farm offers “better” coverage.
Fact
There is no such thing as “good” or “bad” life insurance. It’s a matter of finding a favorable policy, offering the most coverage, at an affordable rate. Every life insurance company evaluates applicants differently, and some companies are more lenient than others.
Illusion
State Farm is a more reliable company.
Fact
All life insurance companies pay their claims. If a life insurance company fails to pay a valid claim, they will be considered “insolvent” and forced to stop selling life insurance. Life insurance companies are heavily regulated on a state and federal level.
Each insurance company must prove that it is financially stable and has the cash reserves on hand to pay all future claims. If an insurance company cannot prove its financial stability, the company is downgraded and their policies will be transferred to a more financially stable company by the state’s central guarantee fund.
It’s also important to note that the vast majority of the life insurance companies we work with are “A+” rated they have been in the business for more than 100 years.
Your Premiums Pay for Their Ads
State Farm’s advertising budget is well over $800 million per year. The commercials with star athletes and kooky characters are amusing, except when you stop to realize that consumers are footing much of the bill for State Farm’s exposure. Don’t believe us? Check out this article. It talks about auto insurance but applies to life insurance in the same vein.
Meanwhile, a smaller company like Lincoln Financial Group only spends $20 million to $30 million per year on advertising, allowing them to keep their premiums lower, and they still manage to be one of the 10 largest life insurance companies in the United States. Banner Life Insurance, an A+ rated carrier that we at JRC continue to recommend with confidence, spends virtually no money on advertising.Outside of the big names like State Farm, there are thousands of quality insurers across the U.S. offering better rates. Even if you are in State Farm’s top rate class, referred to as “Preferred Best” or “Preferred Plus,” you can still expect to overpay by roughly 30 percent compared to lesser-known companies. Would you rather pay for commercials or coverage?
A Bundle Deal Won’t Save on Life Insurance
One of State Farm’s (and many other big-box insurers’) key marketing strategies is to bundle life insurance with your home and auto insurance. But, life insurance rates are standardized and regulated at the state level. Each state’s insurance commissioner is responsible for ensuring that all providers are charging the same rates, with no preferential treatment.
When a company advertises life insurance at a seemingly unbeatable price as part of a bundle deal, what they’re really doing is applying a discount on auto or home insurance to compensate for what is traditionally the weak link in their repertoire.
Put simply, discounts on life insurance don’t exist. Bundling is an “upsell” strategy to make you increase both your commitment and cost of coverage.
State Farm’s Best Rates are Virtually Unattainable
Large life insurance companies generally offer all of their applicants Preferred Best rates, but the vast majority of these applicants do not receive the rate class they were initially quoted at. You need to be somewhat of a physical specimen to qualify for Preferred Best rates with State Farm.
For example, most companies will grant you Preferred Best rates if your cholesterol is under 300; State Farm wants you to be under 175. In the medical world, an adult with a blood pressure reading of 120/80 is considered to be in excellent health in that department.
Most insurance companies accept 135/85 for Preferred Best rates; State Farm calls for 115/70. And if you have a family history of serious health issues, or a poor driving record, these could also bump you into a lower rate class.
Here are the actual underwriting guidelines for the Preferred Plus rate class from State Farm compared to Banner.
Real-Life Rate Comparisons
To support our points in this article, here are sample rates from State Farm, Banner, and Protective Life, for males and females ages 45-60 in good health. The rates are for a 20-year term life policy with a $500,000 death benefit.
You might be inclined to think that cheaper rates signify inferior coverage, but remember that life insurance is heavily regulated. In these tables, the policies themselves are identical.
How to Get the Best Life Insurance Rates and Best Service
State Farm agents are “captive agents,” meaning they can only sell insurance policies from the company they’re employed by. Their definition of “shopping around” is, at best, severely limited compared to that of an independent agency like JRC.
Captive agents also receive intense pressure to sell a certain number of policies. In some of the more competitive call centers, agents have to sell 20 or more policies per week (which many of them struggle mightily to accomplish) in order to keep from losing privileges and leads. This makes it difficult to provide a high level of consultancy or allow them the necessary time needed to follow through with each client’s application.
We have no vendetta against State Farm and other big-box insurers. They are proud companies that excel in the areas of home and auto insurance. We just want the public to know that life insurance is a different type of product that requires specialized knowledge and experience.
Our agents only offer life insurance, and by specializing in life insurance, were able to provide our client’s with the best rates, insider’s tips, and advice. In just a few minutes, we’ll be able to compare rates and options from dozens of top-rated life insurance companies to make sure you always get the coverage available.Keep your home and auto insurance as is, and come to us for the life insurance advice you need. We will take the time to understand your needs, walk you through the application process, and help you find an affordable policy that will protect your family.
Call us today, toll-free at 855-247-9555, or click the map below to get a free instant life insurance quote online. In less than a minute you can compare quotes and options from dozens of top-rated life insurance providers.
Clifford Pendell
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
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