The general account is where an insurance company invests the premiums it receives from fixed annuity and MYGA policyholders. Unlike a separate account (used for variable annuities), the general account is part of the insurer’s overall balance sheet.
What the Insurer Does With Your Money
When you purchase a fixed annuity, your premium goes into the insurer’s general account, where it is invested primarily in investment-grade corporate bonds, government securities, mortgage-backed securities, and other fixed-income assets. The insurer earns a return on those investments and passes a portion back to you as the credited rate.
The difference between what the insurer earns on its investments and what it credits to policyholders is called the spread. This is how the insurance company makes money on fixed annuity products.
Why It Matters to You
Because your annuity is a general account obligation, your guarantee depends on the insurer’s overall financial strength. If the insurer becomes insolvent, your state guaranty association provides a backstop, typically up to $250,000 or more. This is why AM Best ratings matter when comparing annuities.