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Annuity Facts: How Do I Know a Fixed Annuity Is Safe Since It's Not FDIC-Insured?

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FDIC insurance does not extend to annuities, and that is very much a concern to some consumers – but it is important to remember that FDIC insurance is not free. The interest rate that banks can offer is probably lower than the interest rate you could find on an annuity.

In fact, when you consider the twin ravages of inflation and income taxes, you actually lose purchasing power most years that you have your money FDIC-insured.

So, when you realize that fixed annuities give you a better chance to maintain and even grow your purchasing power, the question is, “What protections do they provide?” You’ll see that these protections are very strong, indeed, because all fixed annuities offer four very valuable layers of protection.

  1. They are issued by insurance carriers that back the annuities with a pool of assets called “reserves” that are mandated and monitored by state insurance regulators.
  2. These insurance carriers are obligated to use all of their general assets to protect annuity values from the effects of any adverse financial conditions.
  3. These insurance carriers provide annuity owners with written, verifiable, contractual guarantees that the money you put into an annuity is protected from loss, other than perhaps a penalty for early withdrawal.
  4. If you have any problem with your annuity carrier, you can contact your state’s insurance department, which has jurisdiction over the carrier.

According to the latest reports of impairments & insolvencies from the National Association of Life & Health Guaranty Associations, only one company actually became insolvent, triggering the guaranty fund. NAFA’s research has found that, since NOLHGA was created in 1983, a total of 30 companies issuing life insurance and/or annuities have gone through the insolvency process. Twenty-nine of those were liquidated, with 28 companies being sold to companies assuming 100 percent of their liabilities (i.e., all contracts); the remaining company’s claims were paid by the respective state guaranty association, which covered 100 percent of the claims. One returned to solvency four years after the initiation of rehabilitation.

(NOTE: NOLHGA does not typically get involved with companies that affect individuals in two or less states, and NAFA did not include companies that operated in less than 10 states. NAFA also did not include companies that issued major medical, long term care, group medical or funeral companies – in other words, that issued no life or annuity business.)

For more information, check out a listing of the state guaranty association information and limits and state insurance department contacts.

In this monthly column, the National Association for Fixed Annuities (NAFA) will provide essential information about fixed annuity product features, regulation, tax issues, and industry news. We invite you, the reader, to send us any questions that you often hear — or that you may have yourself. Submit your questions to [email protected] with the subject line “Fixed Annuity FAQ” to have your problems answered here.

The National Association for Fixed Annuities (NAFA) is a national trade association exclusively dedicated to promoting the awareness and understanding of fixed annuities — including income, declared rate, market value adjusted, and indexed. You can follow NAFA on Twitter at


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