Is State Farm the Neighbor from Whom You Should Buy Life Insurance?

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Is State Farm the neighbor from whom you should buy life insurance? I’m sure you’ve heard their jingle “like a good neighbor, State Farm is there” and may be wondering if they’re also there for your life insurance needs. After all, you may have your car and homeowners insurance through them, your agent been serving your family for many years, why wouldn’t you trust him/her with your life insurance needs?

In this review, I will compare State Farm against the best in the life insurance industry when it comes to policy choices, underwriting, and rates. I will attempt to answer all the questions and let you draw your own conclusion. My goal is straightforward: to make sure you really know what you’re buying before you buy. This review will save you the afterthoughts that sometimes come after a regretful purchase – “I didn’t know that!” or “I wish I had paid more attention before purchasing this policy.” Let’s use some critical thinking and find out if you should keep or find a new neighbor.

Disclaimer: I am not a State Farm agent; I am a licensed broker who gives his personal opinion about their life insurance products and services.

Related: Should you buy life insurance from Costco?

State Farm History

State Farm was founded in 1922 by George J. Mecherle, a retired farmer who specialized in selling automobile insurance for farmers. The company later expanded into other insurance fields, such as homeowners and life insurance, and ultimately into banking and financial services. As of 2017, State Farm had 70,000 employees and 19,000 agents. Today, they are servicing over 80 million customers in the US and Canada.

State Farm Financial Ratings

  • A.M. Best – A++
  • Moody’s – Aa1
  • Standard & Poor’s – AA

State Farm has a strong financial foundation. Keep in mind this should never be the sole reason for determining whether you should buy or not. Financial strength only reveals if a company is solid enough to be able to pay their claims. It shows nothing about its products or the quality of service they offer.

Life Insurance Products Offered by State Farm

State Farm offers term, whole, and universal life insurance. Below I will review each policy in great detail.

State Farm Term Life Insurance Review

Term life insurance is probably the most straightforward coverage to get. You buy a coverage (a “death benefit”) for a period (term length). The terms are usually 10, 20, or 30 years. The coverage and the premium stay the same through the term period. If you pass on during that period, your beneficiaries will collect the purchased death benefit; if not, you can convert the policy at the end of the term to whole life, or drop the policy altogether. State Farm offers four types of term life policies:

  1. Select Term Life Insurance – This policy has a 10-, 20-, or 30-year term with a guaranteed death benefit.  Note that the 10-year term is reserved for those 20 to 75 years old, the 20-year term for those 20 to 65, and the 30-year for those 20 to 45. If you are 46 years old, you can only buy a 20-year policy. The minimum coverage starts at $100,000, and the premium stays level through the original policy’s term. The coverage is guaranteed to renew up to age 95 and is convertible to a permanent whole life policy regardless of your current health.
  2. Return of Premium Term Life InsuranceReturn of premium or “ROP” offers a 20- or 30-year coverage. If you outlive the policy, you will receive all the paid premiums back. The policy is guaranteed to renew up to age 95, and the minimum coverage starts at $100,000.
  3. Mortgage Term Life Insurance – This is a decreasing term life insurance that is designed to offer protection of a residential mortgage should you die prematurely. The term on this policy is only available for 15- or 30-year periods (which mimic your mortgage period), and after the first five years, the death benefit decreases over the life of the policy. This type of term policy is also called “decreasing term life” and the minimum for this coverage starts at $50,000 (subject to your mortgage balance).
  4. Instant Answer Term Insurance – This is a term policy without an exam, with $50,000 in death benefit that can be issued from age 16 to 45. The policy will last to age 50, or a 10-year term, whichever is later. So if you bought this policy at age 45, the 10-year term would come after turning 50, so you will have the policy until age 55.

State Farm Whole Life Insurance Review

Whole life is a policy that lasts for as long as you live. It guarantees your beneficiaries will collect the death benefit and also builds a cash value with tax-deferred benefits that you can tap into while still alive. Whole life policies cost a lot more than a term policy (3 to 4 times as much), and although there are a few reasons why someone would choose whole life (such as estate tax planning), for the most part, term life is a better and more economical choice. State Farm offers three types of whole life, and the issue ages are 50 to 80 (75 in NY):

  1. Limited Pay Life – When you buy a whole life policy, you typically pay the premiums as long as you own the policy. With this option, State Farm limits your payment period to 10, 15 or 20 years. In other words, instead of paying the policy for as long as you live, you can choose to complete it in 10 years and have a policy in place. It’s not the wrong choice, provided you have the funds. You still enjoy the tax-deferred growth, the cash benefit accumulation potential, and dividends (however, dividends are not guaranteed).
  2. Single Premium – Just like limited pay, this policy offers a “one and done” approach. One payment to pay your policy and have the death benefit in place.
  3. Final ExpenseFinal expense insurance is used to cover the charges of affairs specifically related to your death. This coverage may include the cost of a funeral service, burial, and other expenses associated with your “final expenses.” These policies are also referred to as “burial insurance” and have a lower face value amount, usually only up to $25,000. State Farm offers a fixed $10,000 in death benefit.

Whole Life Optional Riders

Life insurance riders are add-on benefits to enhance or customize your policy. State Farm offers three riders from which to choose:

  • Waiver of premium disability – If you become disabled, State Farm will waive the premiums so that you can preserve your policy.
  • Guaranteed insurability option – You buy the option to buy life insurance at future dates without a medical exam at standard rates. For instance, when you get married or have a child, you can exercise that option. Option ages are 17, 22, 25, 28, 31, 34, 37, 40, 43, 46 and 49.
  • Payor insurance – If you purchased coverage for a child and become disabled or pass on, this rider will wave the premiums for a set period. If you are disabled and can’t pay for your coverage, they will waive the premiums until you recover from disability. The riders remain in place until the insured child becomes 25 years old.

State Farm Universal Life Insurance Review

Universal life insurance is another form of a permanent policy like whole life. It offers greater flexibility when it comes to premium options and death benefits. In other words, the parameters such as premiums and death benefits aren’t set, they are interchangeable to fit your life in the future. It also carries a cash component tied to the policy which you can access while the policy owner is still alive. State Farm offers three types of universal life policies:

  1. Universal Life – A traditional Universal Life policy with a minimum $25,000 in coverage for ages 0 to 19, $50,000 in coverage for ages 20 to 54, and $25,000 in coverage for ages 55 to 85.
  2. Joint Universal Life – This policy covers two individuals and pays the death benefit upon the death of the first insured. The issue ages are 20 to 85, and the minimum coverage starts at $100,000.
  3. Survivorship Universal Life – Survivorship Universal Life – This policy is usually part of estate planning that pays a death benefit after both of those insured have passed on. The minimum coverage is $250,000, and issue ages are 20 to 90 (20 to 78 in CA).

State Farm vs. Other Carriers’ Sample Monthly Rates

State Farm sample rates

Male 20-year Term $250,000

CompanyAge 30Age 40Age 50Age 60
 Protective $13.12 $17.85 $41.50 $111.59
 Banner $13.33 $19.26 $40.85 $111.13
 AIG $13.54 $19.38 $42.73 $114.74
 Foresters $13.56 $18.81 $42.66 $114.84
 Lincoln$13.56 $18.38 $46.55 $190.53
 Mutual of Omaha $13.56 $20.08 $46.55 $134.05
 Principal $14.66 $19.03 $42.61 $110.03
 SBLI $14.79 $21.67 $51.68 $147.70
 Transamerica $20.34 $26.45 $51.17 $135.88
State Farm $18.70 $30.23 $58.95 $147.90

Female 20-year Term $250,000

CompanyAge 30Age 40Age 50Age 60
 Protective $11.83 $15.27 $31.18 $77.61
 Banner $11.74 $15.67 $31.17 $78.83
 AIG $11.81 $18.51 $35.59 $89.66
 Foresters $12.47 $16.63 $31.94 $85.97
 Lincoln$12.08 $16.14 $32.77 $160.13
 Mutual of Omaha $12.64 $19.21 $36.05 $94.02
 Principal $13.13 $16.63 $32.90 $77.92
 SBLI $13.31 $18.99 $36.46 $90.37
 Transamerica $13.98 $21.72 $40.64 $110.51
State Farm $22.40 $34.80 $66.35 $138.78

Male 20-year Term $500,000

CompanyAge 30Age 40Age 50Age 60
 Protective $20.21 $28.38 $75.68 $205.97
 Banner $20.12 $32.68 $74.39 $205.97
 AIG $20.24 $30.62 $77.76 $213.57
 Foresters $21.00 $31.50 $79.19 $223.56
 Lincoln$21.00 $30.28 $78.71 $214.33
 Mutual of Omaha $21.61 $33.42 $85.05 $249.55
 Principal $22.75 $31.50 $78.66 $213.50
 SBLI $21.32 $36.92 $96.06 $286.85
 Transamerica $23.65 $43.00 $95.46 $253.70
State Farm $28.30 $41.75 $96.15 $273.20

Female 20-year Term $500,000

CompanyAge 30Age 40Age 50Age 60
 Protective $17.63 $24.94 $55.47 $139.32
 Banner $17.11 $25.49 $55.47 $145.00
 AIG $17.21 $27.16 $63.06 $163.40
 Foresters $18.81 $27.13 $57.75 $165.81
 Lincoln$18.16 $26.16 $58.41 $148.05
 Mutual of Omaha $18.99 $28.61 $64.05 $169.93
 Principal $19.69 $26.69 $59.24 $149.27
 SBLI $19.14 $29.67 $65.87 $173.03
 Transamerica $19.78 $34.83 $73.10 $204.68
State Farm $33.05 $53.50 $109.20 $258.85

Male 20-year Term $1,000,000

CompanyAge 30Age 40Age 50Age 60
 Protective $33.97 $51.17 $142.33 $396.03
 Banner $37.84 $58.48 $140.61 $406.63
 AIG $34.95 $53.98 $144.80 $418.14
 Foresters $34.13 $56.00 $150.50 $438.38
 Lincoln$49.00 $70.00 $147.70 $418.78
 Mutual of Omaha $37.80 $59.68 $161.18 $481.43
 Principal $38.50 $55.56 $147.88 $418.78
 SBLI $35.24 $56.03 $147.73 $457.62
 Transamerica $39.56 $80.84 $178.02 $483.32
State Farm $44.35 $72.25 $174.85 $519.35

Female 20-year Term $1,000,000

CompanyAge 30Age 40Age 50Age 60
 Protective $28.81 $43.43 $101.91 $267.03
 Banner $28.72 $50.09 $110.51 $294.55
 AIG $28.89 $47.92 $117.12 $309.15
 Foresters $29.75 $47.25 $107.63 $322.88
 Lincoln$38.50 $53.38 $108.50 $283.33
 Mutual of Omaha $31.68 $50.93 $119.18 $324.80
 Principal $32.16 $46.81 $108.94 $283.50
 SBLI $29.67 $44.28 $104.57 $272.92
 Transamerica $32.68 $65.36 $139.32 $388.72
State Farm $53.95 $87.85 $199.25 $499.35

*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of May 2018 and are subject to underwriting approval.*

State Farm Underwriting – Attention Needed

Life insurance underwriting is the process in which the insurance company evaluates your application to decide the risk you pose to them and calculate your rates. The results of your medical exam, your answers to the questions on the application, and information from the medical information bureau (MIB) are just a few of the pieces of information the underwriter uses to evaluate your application.

When it comes to State Farm, the underwriting guidelines are too strict even for the healthiest among us. Let’s review what they offer, and I’ll compare it to what other companies like AIG, Banner, or Prudential’s guidelines are.

  • Cholesterol level – To qualify for the super preferred rate, your cholesterol must be less than 175. Banner Life is a company we represent where you can get the best price to have your cholesterol levels under 300, whether it’s treated with medication or not.
  • Blood pressure level – To qualify for the super preferred rate, your blood pressure has to be less than 115/70. AIG allows 135/85 if you are under the age of 60 years, and 61+ 140/85.
  • Family history – Now you can blame your loved ones even for your higher insurance rates! If you have had a death in your immediate family (parents or siblings) as a result of cancer or heart disease, you will not qualify for State Farm‘s best rate. AIG, for instance, will only raise your prices if they died before the age of 60.  If you are over 65 and applying for life insurance, AIG will ignore the family history rule.
  • Traffic violationState Farm doesn’t allow any traffic violations within the last 24 months. (This may be impossible for some.) Banner Life allows up to 2 moving violations during the previous three years.
  • History of DUI – With State Farm, to qualify for the best rates, you can’t have any history of a DUI. With other companies such as Banner Life, to get the best rate, they are only looking at the past five years.
  • History of alcohol or drug abuse – With State Farm, you can’t have any history to qualify for best rates. Banner Life, for instance, will get you a preferred rate if your history was over ten years ago.

Related: Buying life insurance with pre-existing conditions

Even if you qualify for the best rate with State Farm, you will still end up paying 20-25% more to buy life insurance from them. Secondly, the point is that only 5%-10% of the population will even qualify for the best rates, so what about the rest of us?

Can you imagine if you also have a few other health conditions like type 2 diabetes, sleep apnea, or even just being overweight? You will pay a lot more. It’s in your best interest to shop with all the insurance companies before making a final selection.

Source: State Farm website also see a screenshot below,

state farm underwriting

State Farm Pros

state farm pros

I must say that when it comes to property and auto insurance, they are one of the best out there. At one point, I bought insurance for both my car and home with them. It was the lowest I could get the agent was professional and easy to reach when I needed her. They also have excellent financial ratings from leaders in insurance ratings, like A.M. Best and Moody’s.

State Farm Cons

state farm cons

I’m not trying to pick on State Farm. As I stated before, they have their niche which is auto and property, and they are outstanding there. But when it comes to life insurance, it’s like wearing your high school suite 30 years later. It may fit but will be very uncomfortable. Life insurance is not something they specialize in; it’s something they sell to their loyal customers.

  • Your State Farm agent is captive – He/She can only sell one company’s policy to you. Unlike an insurance broker who represents multiple companies from which to choose. Whether it fits your lifestyle, age, or health history really doesn’t matter, because they only have one option. It’s not to say that the agent doesn’t care about you, but they have a quota to meet, and after all, they work for State Farm, not you.
  • Their pricing isn’t competitive – Even if you love your agent, it’s hard to justify paying more for something that you can get for less. We are not even saying that you need to give up quality. Banner, AIG, and Prudential (among other companies we work with) are all top-rated A+; they aren’t companies who just starting in the life insurance business.
  • Term life length – Their 30-year term life is reserved for ages 20 to 45. So if you are 46 and want to buy a 30-year term, they can only offer you a 20-year. This isn’t ideal – what if you go in for a business loan and need key person life insurance for 30 years? You guessed it; you would have to search somewhere else. Other insurance brokers, such as myself, can find you a 30-year term if you are age 60 or less.
  • You better be perfectly healthy – If you missed the details of the underwriting criteria, you must meet to qualify for the best rates, go back and reread it. You have to be a super athlete with these stats to get the elite rates, and even then, at the end of the day, you’re still paying for an overpriced life insurance policy. Try applying if you’re not entirely healthy and see what prices you will get.

Related: 5 offbeat ways to save on life insurance

Final Thought

Use our site to compare rates from a few other life insurance companies with State Farm, and you will be glad you did. It’s is your responsibility as a consumer to do so, and I encourage you to compare all the rates you can before you buy. My purpose in this review was to display the facts when it comes to their pricing and products and let you decide for yourself.

It should be a lot easier for you now, knowing what you now know, when buying life insurance to protect your family. You can run the quotes on this page yourself, or sit and dial 866-326-3053, and we will do the rest. We will present you with an unbiased personal quote for your situation from over 50 companies from which to choose.

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2018-07-09T17:32:50+00:00May 15th, 2018|Categories: Company Reviews|0 Comments

About the Author:

Ron is a licensed life & health insurance broker. He has two amazing rescued pit bull puppies. He also enjoys real food, heavy squats, critical thinking, and reading.

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