If you’re considering an annuity, one of the first questions you should ask is simple:
Are annuities really guaranteed—and who’s backing those guarantees?
A lot of advisors talk about “guarantees,” but very few explain where those guarantees actually come from.
Let’s break it down in plain English so you can feel confident about how annuities are protected.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
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What Does “Guaranteed” Really Mean With Annuities?
Annuities are built on contractual guarantees.
That means the benefits—income, growth, or protection—are written directly into the contract.
They are not based on market performance or promises.
But here’s the key question 👇
Who is responsible for honoring that contract?
Who Actually Backs Annuity Guarantees?
Annuities are backed by layers of protection, not just one source.
1. The Insurance Company Itself
First and foremost, annuities are backed by the claims-paying ability of the insurance carrier.
That’s why company ratings matter.
Stronger reserves = stronger ability to pay claims.
💡 Pro Tip: Insurance companies are required to hold far more reserves than banks—often close to dollar-for-dollar.
👉 Want help reviewing the strongest annuity carriers? Click here to schedule a call.
2. They Are NOT FDIC-Insured (But There’s a Similar Safety Net)
Annuities are not protected by the FDIC like bank accounts.
However, there is a comparable system in place.
Every state has a State Insurance Guarantee Association that steps in if an insurance company fails.
How State Annuity Coverage Works (Simple Example)
Most states protect annuity owners up to $250,000 per person, per company.
Here’s how it works:
- You invest $250,000 into an annuity
- The insurance company fails (very rare, but possible)
- The state steps in and makes you whole up to your state’s limit
What If the Company Only Has Partial Assets?
Example:
- You have $250,000 in an annuity
- The carrier can return $150,000
- The state covers the remaining $100,000
- You’re made whole up to the state limit
Do All States Have the Same Coverage Limits?
No—and this is important.
Most states are at $250,000, but some are higher:
- Florida: ~$300,000
- New Jersey: $500,000
- Connecticut: $500,000
Coverage always depends on your state, not where the company is headquartered.
👉 If you want to check your state’s limit, schedule a call here.
What If You Have More Than $250,000 to Invest?
This is where smart planning comes in.
You generally have two main options:
Option 1: Spread the Money Across Multiple Carriers
This increases your state-level protection.
Example:
- $1 million
- Split into four $250,000 annuities
- Four different companies
- Fully covered by state guarantees
💡 Real Example: One client invested $2 million across eight annuities with eight different companies to stay within coverage limits.
Option 2: Use a Highly Rated Carrier
Some people choose one large, financially strong company.
For example, companies like Allianz have trillions in assets.
Even though state coverage may still be capped, many investors feel comfortable with these firms due to their size and financial strength.
There’s no “right” answer—only what fits your comfort level.
What About Lower-Rated Insurance Companies?
This often surprises people.
Some B or B++ rated companies offer higher rates—not because they’re unsafe, but because:
- They have lower reserve levels
- They can invest in slightly higher-yield lower-grade bonds
- That can result in better income or growth
A good example is Nassau, which has been around for over 100 years despite a lower rating.
Ratings alone don’t tell the whole story.
What Happens If a Carrier Runs Into Trouble?
There are additional safeguards most people don’t realize:
- The state steps in
- Another insurance company may take over the contract
- Your annuity continues—often the only change is the logo on your statement
Companies like Athene have stepped in during past situations to assume contracts.
The insurance industry works hard to protect its reputation.
So… Are Annuities Actually Guaranteed?
Yes—but with clarity.
Here’s the full protection stack:
- Insurance company’s claims-paying ability
- State Insurance Guarantee Association
- Industry takeovers in rare failure cases
That’s why annuities remain one of the most regulated financial products available.
Conclusion
There’s risk in everything.
The key is how you manage it.
You can:
- Spread annuities across carriers
- Choose highly rated companies
- Or blend both strategies
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have