Are Annuities Safe? The Short Answer
- Market crashes: fixed annuities, MYGAs and fixed index annuities cannot lose value when the market falls. Variable annuities and RILAs can.
- Not FDIC insured: annuities are backed by the insurance company, not the federal government.
- The biggest real risk: a weak insurer. When a regulator takes over a struggling company, withdrawals can be frozen for years.
- The most common risk: needing your money early and paying a surrender charge.
So annuities are safe for money you will not need during the surrender period, bought from a highly rated insurer. They are a poor fit for an emergency fund.
How Safe Is Each Type of Annuity?
“Safe” means two things: your principal will not shrink, and the company will be there to pay you. Here is how each type handles the first part.
| Annuity type | Can market losses reduce your principal? | Main risk |
|---|---|---|
| Multi-year guaranteed annuity (MYGA) | No. Principal and rate are guaranteed for the term. | Surrender charges if you leave early |
| Fixed index annuity (FIA) | No. In a down year your credit is zero, not negative. | Surrender charges and capped upside |
| Immediate income annuity (SPIA) | No. Payments are set when you buy. | You give up access to the lump sum |
| Registered index-linked annuity (RILA) | Yes, past the buffer or floor you choose. | Losses beyond the buffer |
| Variable annuity | Yes. It is invested in market subaccounts. | Market losses and fees of 1% to 4%+ a year |
If safety is your top priority, a MYGA or fixed annuity from a highly rated insurer is usually the best fit. For more on market risk, read can you lose money in an annuity.
What Happens to an Annuity if the Market Crashes?
- MYGA or fixed annuity: nothing. Your rate and principal are guaranteed by contract, not tied to the market.
- Fixed index annuity: you earn 0% for that crediting period, and your account value does not drop. Past credits stay locked in.
- Income annuity: your check stays the same. It was set the day you bought.
- Variable annuity or RILA: your account value can fall, though a RILA’s buffer absorbs the first part of a loss.
One caution: a market crash can strain an insurer’s own investments. That is why the company’s strength matters as much as the product.
Are Annuities FDIC Insured?
No. Annuities are issued by insurance companies, not banks, so FDIC insurance does not apply. Read are fixed annuities FDIC insured for a side-by-side with bank CDs.
What Happens if an Annuity Company Fails?
Insurer failures are uncommon, but they happen, and they do not happen overnight. A struggling company usually goes through these stages:
- Rating downgrades and regulatory warnings. These are the early signals to watch.
- Rehabilitation. A court lets the regulator take control and try to fix the company. Recent annuity cases came with a freeze on surrenders and withdrawals.
- Liquidation. If the company cannot be fixed, it is wound down. State guaranty associations generally step in only at this stage.
Two recent cases show what owners go through:
- Colorado Bankers Life (2019): North Carolina placed it into rehabilitation with a moratorium on withdrawals and surrenders. Liquidation did not take effect until November 30, 2024, more than five years later (NOLHGA[2]).
- PHL Variable (2024): Connecticut placed it into rehabilitation on May 20, 2024. The moratorium bars surrenders and withdrawals on its fixed policies and annuities, though required minimum distributions are allowed (Connecticut Insurance Department[4]).
Atlantic Coast Life: What Is Happening Now
On September 15, 2026, South Carolina’s insurance director asked a court to place Atlantic Coast Life into rehabilitation (Insurance Journal[5]). As of November 5, 2026, we found no report of a court order.
- Florida: suspended the company’s authority to sell new policies on September 30, 2026. Existing policies must still be serviced (Florida OIR[6]).
- AM Best: rates Atlantic Coast Life and its affiliate Sentinel Security Life C+ (Marginal), under review with negative implications (AM Best[7]).
- My Annuity Store: we stopped offering both companies for new business on January 23, 2026.
If you own one of these contracts, read our guide to Atlantic Coast Life and A-CAP for your options and what to check first.
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Send us your most recent annuity statement and we will send back a written report on what the contract does, what it costs you, and whether a move would leave you better off after any surrender charge. No cost, and no obligation to change anything.
What State Guaranty Associations Do, and Do Not Do
Every state has a life and health insurance guaranty association. It is a backstop for policyholders when an insurer is liquidated, not a form of FDIC insurance.
- Coverage limits: most states cover at least $250,000 in present value of annuity benefits, per person, per insurer. Limits vary by state; see our state guaranty association limits.
- Timing: coverage generally begins at liquidation, not when a petition is filed or rehabilitation starts. That can mean years of waiting.
- Not a reason to buy: state law bars insurers and agents, including us, from using guaranty coverage to sell an annuity (NAIC Model Act #520, § 19[3]). Judge the insurer instead.
Why Do Some People Say to Avoid Annuities?
The warnings are real, and most come down to the product or the sale, not the guarantee. The Minnesota Attorney General’s office, for example, warns seniors about long surrender periods and pressure to switch contracts (Minnesota AG[8]).
- Long surrender periods: some contracts lock money up for 10 years or more. Pick a term that ends before you need the money; see how surrender charges work.
- Fees: MYGAs and most fixed index annuities have no annual fee, but optional riders often cost about 1% a year. Variable annuities commonly run 1% to 4%+ a year.
- Inflation: a fixed payment buys less every year. A 3% inflation rate cuts its buying power by about a quarter in 10 years.
- Pressure to switch: replacing an annuity can restart a surrender period. Ask what you give up before you move money.
- Bonus offers: a premium bonus often comes with a longer surrender period or lower caps.
How to Check if an Annuity Company Is Safe
The best single signal is the insurer’s independent financial strength rating. The four main rating agencies are AM Best, S&P, Moody’s and Fitch.
- AM Best A++ and A+: Superior.
- AM Best A and A-: Excellent.
- AM Best B++ and B+: Good.
- AM Best B and B-: Fair.
- AM Best C++ and C+: Marginal. Atlantic Coast Life sits here today.
- COMDEX score: a 1 to 100 percentile ranking that blends the agencies’ ratings into one number.
Ratings are a starting point, not a guarantee. Also look at the direction of recent rating changes, regulatory actions and how the company invests its reserves. Compare carriers on our insurance company ratings chart.
How to Keep Your Annuity Safe
- Choose a strong insurer. Favor an AM Best rating of A- or better, and be cautious of any recent downgrade.
- Spread large amounts across insurers. Splitting a big purchase limits how much you have with any one company.
- Match the term to your timeline. A surrender period that ends before you need the money avoids penalties.
- Know your penalty-free access. Most contracts allow free withdrawals of about 10% a year.
- Stick to fixed or fixed index annuities if you do not want market risk to your principal.
Who Should Not Buy an Annuity
- You may need the money soon: keep emergency savings and near-term spending in the bank.
- You want full stock market growth: a fixed index annuity caps your upside in exchange for the 0% floor.
- Your income already covers your needs: a pension plus Social Security may make lifetime income redundant.
- You are under 59½ and may withdraw gains: the IRS adds a 10% penalty on most early withdrawals of earnings (IRS Publication 575[9]).
Our guide on whether you should buy an annuity covers who benefits most and who should pass.
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Are annuities safe? A fixed annuity or MYGA from a highly rated insurer is one of the safest places for retirement money you can leave alone, and you can compare today’s fixed annuity rates by insurer rating before you buy.
Frequently Asked Questions
Are annuities safe in a recession?
Fixed annuities, MYGAs and fixed index annuities are. Your principal is not invested in the stock market, so a recession or crash does not reduce your contract value. Variable annuities and RILAs can lose value.
Can you lose all your money in an annuity?
Not to the market with a fixed annuity, MYGA or fixed index annuity. The realistic ways to lose money are surrender charges if you cash out early, or an insurer failure that freezes withdrawals until a guaranty association steps in. Variable annuities can lose value with the market.
What happens to my annuity if the insurance company fails?
The state regulator usually takes control first, through rehabilitation. In recent cases, surrenders and withdrawals were frozen during rehabilitation. If the company is later liquidated, the state guaranty association covers benefits up to its limit, which is at least $250,000 per person, per insurer in most states.
Are annuities safer than CDs?
They are protected differently. A CD is FDIC insured up to $250,000. A fixed annuity or MYGA is backed by the insurer and then by your state guaranty association. Both guarantee your principal, so the insurer's financial strength is the key thing to check with an annuity.
Is it safe to buy an annuity online?
Yes, when you work with a licensed agency and the contract is issued by a highly rated insurer. The insurance company, not the website, holds and guarantees your money.
Is Atlantic Coast Life safe?
Atlantic Coast Life faces a pending rehabilitation petition in South Carolina and is rated C+ (Marginal) by AM Best. My Annuity Store stopped offering it on January 23, 2026. See our Atlantic Coast Life owner's guide.
