State Farm vs. USAA Auto Insurance
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UPDATED: Jul 8, 2021
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When it comes to car insurance, State Farm and USAA have a lot in common. They were both established in the same year, they were both established to serve a specific demographic group, and they both have grown well beyond their humble beginnings 90 years ago.
We’ll take a look at some of the details regarding both companies here, in case you’re considering either one of them for your next auto insurance policy.
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It’s very interesting to note that quite a few insurance companies were originally started because a businessman or a group of business partners wanted to provide insurance for a specific group of people. Such is the case with both State Farm and USAA.
State Farm was originally established to help America’s farmers, while USAA was begun to provide insurance to military officers. Each has strength in its current niche.
More About State Farm
When State Farm was first established in 1922, it was intended to be a mutual company that provided auto insurance for America’s farmers. As a mutual, it was owned by the policyholders, rather than corporate investors or another business. It was so successful that it didn’t remain confined to auto insurance for very long.
According to records from the Texas Department of Insurance, State Farm Insurance consists of 11 different companies, with State Farm Mutual Automobile Insurance Company being among them.
One of the companies is listed by the state of Texas as currently being inactive.
However, for the purposes of auto insurance, it probably doesn’t matter to the average consumer how the company’s business arrangement is set up.
Where marketing is concerned, most of us remember insurance companies according to a logo, a corporate jingle, a slogan, or a colorful mascot or character.
In State Farm’s case, it’s the “like a good neighbor” slogan encapsulated in a catchy tune by American songwriter/singer Barry Manilow. That slogan and jingle have been in use since the 1970s.
Today, State Farm is one of the nation’s largest auto insurance providers, as well as being #43 on the Fortune 500 list of the top 50 American companies in terms of total revenue.
According to information found on its own website, the company now services more than 81 million policies in the United States and Canada.
More about USAA
Also established in 1922, USAA was the brainchild of a group of military officers who banded together to provide joint auto insurance coverage for one another’s vehicles.
Back in 1992, the car insurance business was in its infancy and the few companies that existed did not know how to meet the special needs of military members. USAA set out to change that.
Today, members of the military and their families still have unique auto insurance needs. That’s why USAA remains one of the premier insurance companies designed specifically for them. According to the main profile on the USAA website, the company currently serves more than eight million members.
What makes USAA unique is its business model. Like State Farm, it is a mutual company in that it is owned by policyholders rather than stockholders. But unlike State Farm, not everyone can make use of USAA’s auto insurance and other financial services. Only members and their families can.
To become a member, one must be an active duty or retired member of the military. Any member can include his entire family on his insurance policy, as well as pass that same policy onto the children once they’re old enough to drive.
Theoretically, a policy could go on indefinitely, as it is passed from one generation to the next. Along with that, USAA offers guaranteed renewal as long as a member meets certain requirements.
Since we’re comparing State Farm and USAA for the benefit of consumers, we should take a look at customer satisfaction ratings for both companies. There are several reputable sources of such ratings including companies like J.D. Power and Associates and Temkin Group.
You can also find plenty of independent survey websites where customers are allowed to post their own reviews.
According to a March 2012 PR Newswire press release carried by Red Orbit, USAA ranked first in Temkin Group’s 2012 customer satisfaction survey for car insurance companies.
State Farm came in second. Red Orbit reports that the two were the only insurance companies to receive a “good” rating among those who were surveyed.
The most recent J.D. Power survey shows similar comparative results, with USAA receiving a score of 5/5 while State Farm got a 4/5. Be aware that customer satisfaction is determined by combining the scores of several sub-categories including policy offerings, satisfaction with the claims service, and overall price compared to product.
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Types of Policies Offered
Now that you have a little bit more knowledge about both insurance companies, and how customers feel about them, the next step is to find out what types of auto insurance policies both offer. We’ll provide some general information here; for more details you can contact both companies directly.
Keep in mind that the car you drive and your individual circumstances will be big factors in determining the types of policies for which you’re eligible and how much you’ll pay.
Both State Farm and USAA start with minimum liability policies according to the laws in the various states. Since every state is free to establish their own auto insurance regulations, you’ll find minimum liability amounts will vary greatly. In order to sell car insurance in a given state, both companies must meet those minimums.
If your state requires underinsured/uninsured motorist coverage or personal injury protection insurance, both companies offer them in addition to minimum liability. Both also have collision and comprehensive products to help repair or replace your vehicle after an accident.
Beyond these standard items, State Farm has a few extras in which you might be interested. They offer a medical payments rider, an accident rider that provides additional finances to cover the cost of a rental car and travel expenses, and emergency road service. Obviously, terms and conditions apply to all of them.
USAA offers its members many of the same benefits, as well as a couple of extras.
For example, in addition to their medical payments coverage, USAA includes extended care benefits.
These benefits kick in if the combination of your medical payments and your standard medical insurance runs out while you still need care.
Purchasing a Policy
Before purchasing a policy from either of the two companies, it is wise to get quotes from both and compare them side-by-side. You probably want quotes from two or three other companies as well. In fact, the more comparisons you make, the more likely it is you’re going to find the best policy.
Comparing quotes is a methodical process of looking at all of the individual coverages included in a specific quote, as well as how much you’re being charged for each. What you’re looking at is the total value of the policy in relation to what it offers you.
When you compare, you’ll learn quickly that the most expensive policy is not necessarily the best, and vice versa.
Should you decide that State Farm or USAA is right for you, there are a couple of options for purchasing a policy.
The first is to buy directly from the company by utilizing their website or calling them on the phone. For some people this is the preferred method. The other method is to use an independent insurance agent who represents one of the two companies. This is probably easier done with State Farm, as they are well-known for their extensive network of agents around the country.
In any medium- to large-sized city, you’ll probably find multiple State Farm agents.
As for USAA, independent agents are a little harder to come by. They do exist, but often they are more geared to being financial advisors rather than just insurance agents. This is usually due to the sheer scope of products that USAA offers.
It might be quicker and more efficient for you just to purchase a policy directly from the company.
Make a Sensible Choice
In concluding this article, we want to encourage you to make a sensible choice regarding your car insurance. Many people look only at the monthly cost of an insurance policy in deciding with which company to go. This is not always the wisest option.
In order to make sure you are adequately covered, you really need to know what your insurance needs are. You can evaluate your needs by asking questions about your car’s value, how much you can afford to spend if your car is wrecked in a crash, what your monthly budget is, whether you plan to purchase a new car in the future, and so on.
It would be a shame to spend your hard-earned money on an insurance policy only to find out, after you’ve had an accident, that it doesn’t provide adequate coverage. So take the time to really think it through. If you need help, you can always talk to an insurance agent or a trusted family member or friend.
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