Annuities

Who insures your annuity if the life ins. co. goes bankrupt.

In other words, the FDIC insures your money in a bank up to $100,000.

Not all investments are guaranteed by the government. Private annuities are not an investment backed by the government. If the issuer fails, you lose the annuity. For that reason, you want to check out the company from whom you buy them to make sure they are sound.

I thought I read that an annuity company has to put a certain amount of money away, in some sort of insured vehicle to cover their policyholders in case they go under.

If a annuity co. starts to go under
1) How do you find out.
2) Can you then take your money out, without early penalty.

"I thought I read that an annuity company has to put a certain amount of money away, in some sort of insured vehicle to cover their policyholders in case they go under."

Not exactly. But I think you are referring to "reserves" that insurance companies maintain:

http://www.happyretiree.com/LegalReserveSystem.dic.html

If you've bought your annuity from a life insurance company you probably don't have anything to worry about.

You can check the life insurance company's financial rating at:

http://www.ambest.com/homepage.asp

If you bought the annuity from an investment securities company, look to see if the company covers the investment accounts or annuities with something like SIPC:

http://www.sipc.org/

"If a annuity co. starts to go under
1) How do you find out."

You probably won't know until it's too late. I don't think anybody knew that the CA bank was going under till it actually happened and the FDIC took it over.

"2) Can you then take your money out, without early penalty."

Depends on the terms and conditions of your annuity contract.

Thank you. Like always great info.

Annuities gain safety from the financial stability of the issuing company. Fixed annuities are held in a company’s general account. When it comes to comparing banks to insurance companies, the analysis is simple. Just think of an insurance company as a consistently profitable and solvent bank. Annuities are safe. And that’s a Guarantee from the most stable, consistent companies in the financial industry.

Bryan Anderson:

Annuities are safe. And that’s a Guarantee from the most stable, consistent companies in the financial industry.

I'm not surprised you'd say that Bryan, since the web site you linked is operated by someone of the same name and who is in the business of selling annuities. I thus assume your post was basically a disguised ad for your site, which is against the rules for posting here.

Certainly the annuity industry would like everyone to believe that all annuities are safe. While many annuities are relatively safe and most do get paid as promised in the contract, there is no guarantee that an annuity issuer will never fail. Indeed, some do. I know that from personal experience when I assisted by grandparents a few years ago in attempting to recover as much as they could from the state agency that backed the failed insurer that issued some annuities to them. They were fortunate; they got back about 75-80% of what they were owed under the annuity contract. Not all who own annituties issued by failed issuers do so well. Because there is a risk of failure, it is important to do some homework on the company that is offering the security so that you can try as much as possible to avoid buying from a company that will fail to pay the annuity as promised.

I am a Certified Fraud Examiner and am wrapping up a case as we speak regarding the sale of annuities to a couple who were 81 when they were sold the Annuities, (for a 10 year period certain).  The Broker dealer is getting ready to be indicted by our SC Attorney General.  They were sold Deferred Variable Annuities that are not guranteed or insured.  With certain annuities, all principal and interest are at risk, and the annuity is only as safe as the claims paying ability of the issuer (who was Guardian Life Ins. by the way.)  They appear to be fairly strong, however, anything can happen at anytime to change an Insurance Company's financial strength.  The seniors in question purchased $500,000.00 in annuities at age 81 (for a 10 year period certain) that were totally unsuitable for them and their situation.   I wish annuities were non existent, as they are loaded with hidden fees that are enormous, often times (they were in the case of the clients I was retained to perform brokerage account audit on).  Over the 10 year period certain, they will pay almost $130,000. in fees for m & e fees, contingent deferred sales charges, administrative fees and fund management fees (paid to the fund managers for the management of the mutual funds their annuities are invested in)  Total minimum is 8% of account value annually (for the annuities my clients purchased.  They did not realize the higher tax liability down the road - duped into thinking lower Cap gain tax would be their situation and it is not.  Yes the annuity grows tax free but that is not the case with the annuity payments or the death benefit.  It is all taxed at the higher tax rate as they withdraw and or take payments, not the lower rate my clients thought they were getting.  It adds up quick.  Stay away, the majority of annuities offered are loaded with fees.  (The commissions that broker/dealers get are huge, that is why they push them).  As for Brian, who posted annuities are safe, not a true statement at all!  Seniors stay away from annuities, please.  If you must sink your money in an annuity read the _____ prospectus for Goodness sake.  You will change your mind by the time you get to the 75th page of the prospectus.  They count on people not doing their homework, because if most people did, they would not touch them with a 10 foot pole. Please spread the word.  DO YOUR HOMEWORK.