Are Annuities Safe?
Yes, annuities are safe for most retirement savers when you buy a fixed annuity or fixed index annuity from a financially strong insurance company. The contract guarantees your principal against market losses. That guarantee is only as strong as the company behind it, so the insurer you choose matters more than the product.
- Principal: fixed annuities, MYGAs and fixed index annuities cannot lose value when the market falls.
- Not FDIC insured: annuities are backed by the insurance company, not the federal government.
- The real risk: a weak insurer. When a regulator takes over a struggling company, withdrawals can be frozen for years.
- The other risk: needing your money early and paying a surrender charge.
How safe each type of annuity is
“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 limited upside |
| Immediate income annuity | No. Payments are set at purchase. | You give up access to the lump sum |
| Variable annuity | Yes. It is invested in market subaccounts. | Market losses and higher fees |
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 backs your annuity
An annuity is a contract with a life insurance company. Your money is protected by:
- The insurer’s reserves and capital. State law requires insurers to hold reserves against what they owe policyholders.
- State regulators. Each insurer is supervised by its home state’s insurance department, which can step in when a company weakens.
- The insurer’s investments. Reserves are only as good as the bonds, loans and other assets that back them. This is where problems usually start.
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 gets into trouble
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).
- 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).
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. As of October 12, no rehabilitation order had been reported.
- Florida: suspended the company’s authority to sell new policies on September 30, 2026. Existing policies must still be serviced (Florida OIR).
- AM Best: rates Atlantic Coast Life and its affiliate Sentinel Security Life C+ (Marginal), under review with negative implications (AM Best).
- 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.
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 associations guide.
- Timing: coverage generally begins at liquidation, not when a petition is filed or rehabilitation starts. That can be 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). Judge the insurer instead.
How to judge an annuity company’s safety
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-, A, A+ or A++, 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 surrender charges.
- 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.
Safety is only half the decision. Our guide on whether you should buy an annuity covers who benefits most and who should pass.
Are annuities safe? A fixed annuity or MYGA from a highly rated insurer is one of the safest places for retirement money, and you can compare today’s fixed annuity rates by insurer rating before you buy.
Lock in today's MYGA rate before the October 28 Fed decision
Your rate is set by your application date, not the day rates change. Request a quote and we will confirm current rates for your state and premium, in writing, so you can decide before the market moves.
Frequently Asked Questions About Annuity Safety
Are annuities safe in a recession?
Fixed 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 can lose value.
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.
Are annuities safer than the stock market?
For your principal, fixed and fixed index annuities are safer because market losses cannot reduce it. The trade-off is lower growth potential. Variable annuities carry market risk much like stocks.
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.
Sources
- NOLHGA, Frequently Asked Questions
- NOLHGA, Colorado Bankers Life
- NAIC Life and Health Insurance Guaranty Association Model Act #520
- Connecticut Insurance Department, PHL in rehabilitation
- Florida OIR notice, October 1, 2026
- AM Best release, September 22, 2026
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