What Happens To An Annuity If An Insurance Company Fails?

Annuities provide retirement income, but their safety isn't federally guaranteed like bank deposits. Insurance company failures, though uncommon, can jeopardize annuity funds. States regulate insurance and have guaranty associations to protect policyholders. These associations, funded by member insurance companies, offer coverage up to a limit, often $250,000. Payments are made after the insolvent insurer's liquidation, which can take time. Variable annuities have some investments at risk if held in the insurer's general account. Credit rating agencies assess insurers' financial strength to help consumers choose stable companies. State insurance commissioners can provide information on an insurer's rating. If an insurer fails, policyholders should contact their state's department of insurance and the guaranty association with all relevant records and consider consulting a financial advisor.