Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Apr 3, 2022

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Are annuity accounts insured?

More and more people are looking for new investments to navigate through a slow economy and into the future. One investment that is particularly attractive right now is an annuity account. But you may ask yourself, “Are annuity accounts insured?” Simply put, no they’re not.

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An annuity account is an investment tool in which an investor and provider sign a contract, allowing the provider to invest the money the investor contributes.

In exchange, the investor is guaranteed a certain rate of return on his money. Providers are usually banks or insurance companies.

Annuities make for stable long-term investments because the nature of the contract guarantees a certain rate of return. They are considered low-risk investment ideal for supplementing a retirement plan.

Why are annuity accounts not insured?

The annuity account differs from a standard savings account or certificate of deposit in that the government considers them investments of risk, where the principle is in play just as much as the interest. Typically, the government will not insure such investments.

Annuity accounts are protected only in the sense that the investor receives his payouts as long as the provider remains financially solvent until the time the payouts are scheduled to begin. With an annuity contract there is always the risk of the provider becoming insolvent, although that rarely happens.

Although annuity contracts are low-risk investments, they should still be looked at in the same way as stocks or mutual funds, in terms of how risk occurs. Just like a company you own stock in could go belly up, the company that issues your annuity could also run into financial difficulties.

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How can I mitigate the risk of loss with an annuity account?

The best way to mitigate the risk associated with annuities is to do plenty of research before you sign a contract. Look for insurance companies or banks with a long track record of consistence and stability. You want to look not only for high rates of return, but also at how the company has weathered past financial storms.

Some of the powerhouse insurance and banking companies have been hit fairly hard by the economic difficulties of the past few years. But consider the fact that many of them are suffering due to risky investments. It might be better for you to purchase an annuity through a smaller insurance company or bank that has made much more sound investments.

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Are state guaranty associations any help?

All 50 states have guaranty associations whose mission is to provide consumer protection in the event that an insurance company becomes insolvent. What each guaranty association covers, and to what amount, differs from state to state. New York, for example, provides for coverage of up to $500,000 on annuity contracts. No state provides less than $100,000.

The funding for guaranty associations comes from fees that all insurance companies pay into their state insurance systems. While this is a reasonable way to fund the associations, the difficulty arises in that fund amounts will not necessarily be high enough to cover all the losses of a larger-than-average insurance company that fails.

Is there any backup in place for guaranty associations?

Practically speaking, it’s not unlikely that in a controlled circumstance a state government would step in to make up a shortfall experienced by a guaranty association. But this by no means completely eliminates the risk. If the failure of a large insurance company touched off a string of failures among smaller companies, it’s entirely possible that the guaranty association could also fail and the state government won’t have funds to cover all the losses.

In the end, while annuities are generally safe investments, they still pose the risk of total loss. If you already own an annuity, and your provider is on shaky financial ground, there’s not much you can do about it. You signed a contact that keeps your money tied up in the annuity for a number of years, come what may.

If you’ve not yet invested in an annuity, and you’re thinking if doing so, be sure to do some due diligence before accepting any annuity contract. Be especially careful about investing in a contract with a bank or insurance company located in another state. In the case of failure, state residents are given preference by the guaranty association; some may not even cover the losses of out-of-state investors.

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