Annuities are on the Federal Deposit Insurance Corporation's list of products it does not insure (FDIC, Financial Products That Are Not Insured by the FDIC, last updated May 12, 2026). If the insurer fails, 40 of 51 state guaranty systems cover annuities up to $250,000 in present value per person, per insurer (NOLHGA state table, information as of June 1, 2025, checked October 14, 2026).
Are annuities FDIC insured or federally insured?
No. The Federal Deposit Insurance Corporation (FDIC) lists annuities among the products it does not insure, "even if they were purchased from an insured bank" (FDIC, Financial Products That Are Not Insured by the FDIC, last updated May 12, 2026). No federal agency guarantees an annuity.
The Securities and Exchange Commission (SEC) puts it plainly: an insurer's obligations under an annuity "are subject to its financial strength and claims-paying ability. In other words, if the insurance company has financial difficulties, it may not be able to pay you" (SEC Investor.gov, Annuities, checked October 14, 2026).
A salesperson may say an annuity is "as safe as a CD" or "backed by the state." The contract says something narrower: the guarantees are the insurer's promise. See annuity vs CD for the full comparison.
What actually stands behind an annuity
The first layer is the insurer itself. Your premium goes into the insurer's general account, mostly bonds and loans, and the insurer must hold reserves for what it owes you.
The second layer is state regulation. Every insurer "operates within a comprehensive state regulatory framework," and regulators require it to hold capital based on the risks it takes, under a system called risk-based capital (NAIC letter to Sen. Elizabeth Warren, September 24, 2026). State law also limits what kinds of assets an insurer may hold.
The third layer is the state life and health insurance guaranty association. It is a backstop that pays covered benefits, up to a limit, after a court orders a failed insurer into liquidation. It is not a substitute for choosing a sound insurer.
State guaranty associations: the backstop and its limits
Most states follow the National Association of Insurance Commissioners (NAIC) model act, which covers "$250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values," and caps total coverage at $300,000 per life across life and annuity benefits with one insurer (NAIC Model 520, Life and Health Insurance Guaranty Association Model Act, Section 3, as printed 2018). The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) table shows 40 of 51 jurisdictions at $250,000 and 11 higher (NOLHGA, How You're Protected, information as of June 1, 2025).
| State (association page) | Annuity limit | Notes from the association |
|---|---|---|
| California | $250,000 | Covers 80% of present value, up to $250,000; $300,000 total per life |
| New York | $500,000 | $500,000 total per life; only insurers licensed in New York |
| Texas | $250,000 | Present value, per life |
| Florida | $250,000 | Deferred annuities; $300,000 once in payout |
| Illinois | $250,000 | $300,000 total per person |
| Pennsylvania | $250,000 | Present value, per life; $300,000 total per life |
| Ohio | $250,000 | Present value, including cash values |
| Arizona | $250,000 | $300,000 total per life |
| Washington | $500,000 | Present value, per contract owner |
| New Jersey | $250,000 | Deferred annuities; $500,000 once in payout |
Limits as stated on each state association's site, checked October 14, 2026, and matching the NOLHGA state table (based on information as of June 1, 2025). Laws change; confirm on your own state's site.
Caveats that matter:
- Per insurer. Limits apply separately to each failed company (NOLHGA FAQ, Question 13, checked October 14, 2026).
- Your state at the time of failure. Coverage generally comes from the association where you live when the insurer is ordered into liquidation, not where you bought (NOLHGA FAQ, Question 5).
- Above the limit. The excess becomes a claim against the failed insurer's estate, which may pay part of it (NOLHGA FAQ, Question 12).
- High rates and index gains. The model act excludes interest above a formula tied to Moody's Corporate Bond Yield Average minus 2 points, and NOLHGA says most states exclude index-linked interest not yet credited (Model 520, Section 3; NOLHGA Product Coverage FAQ, checked October 14, 2026).
- Delays. With court approval, an association may impose temporary moratoriums on cash withdrawals (Model 520, Section 8). Covered does not always mean available right away.
Why the salesperson is not supposed to bring it up
Agents and insurers generally may not use the guaranty association to sell. The model act says no person, "including a member insurer, agent or affiliate," may use the association's existence "for the purpose of sales, solicitation or inducement to purchase" (Model 520, Section 19).
States have enacted this. California Insurance Code section 1067.17 uses nearly the same words, and the California association's FAQ says insurers and agents "are prohibited by state law" from using it "to sell, solicit or induce the purchase" (California Life and Health Insurance Guarantee Association FAQ, checked October 14, 2026). The required notice also tells you that you "should not rely on coverage" when choosing an insurer (Model 520, Section 19C).
If a seller leans on "the state guarantees it" to close a sale, treat that as a warning sign and say so to your state insurance department.
Ratings and ownership: check more than one signal
Rating agencies grade an insurer's ability to pay. AM Best's scale runs from A++ (superior) to D (poor), and an "E" or "F" means the insurer is under regulatory supervision or in liquidation. AM Best calls the rating an opinion that is "not a recommendation" and should be "only one factor" (AM Best, Guide to Best's Financial Strength Ratings, version 121719, checked October 14, 2026). S&P Global also describes ratings as "forward-looking opinions" (S&P Global Ratings, Understanding Credit Ratings, checked October 14, 2026). Ask for ratings from at least two agencies, with the date.
Ownership is a separate question. The NAIC counted 137 private-equity-owned U.S. insurers at year-end 2024, holding 31% of their bonds in asset-backed and other structured securities against 13% for the industry (NAIC Capital Markets Bureau, August 2025). Reserves U.S. life insurers ceded offshore "nearly quadrupled" from 2019 to 2023 (Federal Insurance Office Annual Report, September 2025). These are group findings, not verdicts on any company. Our research page who owns your insurer explains what to ask.
When an annuity can make sense, and how to check
For many retirees an annuity from a well-capitalized insurer is a sound place for part of their savings, especially for a guaranteed rate or lifetime income. The point is to know which layer you are relying on.
With larger amounts, splitting money across insurers so each piece stays within your state's limit is a common precaution. It costs some convenience, and possibly a little rate.
Before you sign, check the seller's license and the insurer's complaint record with your state insurance department, and look up the insurer itself in the NAIC Consumer Insurance Search. For variable or registered annuities, also check FINRA BrokerCheck. Use the free-look period to review everything.
A plain example with numbers
Hypothetical: one owner has $600,000 to place in fixed annuities and lives in a state with a $250,000 annuity limit and a $300,000 total limit per life. Assume one insurer fails and its estate pays nothing extra (unusual, but the worst case).
| Hypothetical setup | At the failed insurer | Covered by association | Not covered | Untouched at other insurers |
|---|---|---|---|---|
| All $600,000 with one insurer | $600,000 | $250,000 | $350,000 | $0 |
| $300,000 each with two insurers | $300,000 | $250,000 | $50,000 | $300,000 |
| $200,000 each with three insurers | $200,000 | $200,000 | $0 | $400,000 |
The arithmetic: covered equals the smaller of the amount at the failed insurer and $250,000. With one insurer, $600,000 minus $250,000 leaves $350,000 as a claim against the estate. With three insurers, each $200,000 piece is under the limit, so it is covered in full even if a second insurer also failed, because limits apply per insurer.
Two cautions. If you also own life insurance with the same insurer, the $300,000 total per life can shrink the room. And a California resident in the same case would have 80% of present value covered, so $200,000 at one insurer would be covered up to $160,000 (California Life and Health Insurance Guarantee Association FAQ, checked October 14, 2026).
Red flags
- Saying an annuity is "FDIC insured" or "government guaranteed."
- Using the state guaranty association as a reason to buy, which most state laws prohibit.
- Telling you that the guaranty limit means "there is no risk" with any insurer.
- Steering you to a much higher rate without explaining who the insurer is or how it is rated.
- Quoting one rating without the agency's name or the date of the rating.
- Brushing off questions about who owns the insurer or where it reinsures its business.
- Putting far more than your state's limit with one insurer without discussing the trade-off.
- Calling an annuity "as safe as a CD" without explaining the difference in backing.
- Not giving you the guaranty association notice that most states require with the contract.
- Rushing you to sign before you can check the insurer's complaint record.
Questions to ask before you sign
- Who exactly is the insurer, and which state is its home state?
- What are its current ratings from at least two agencies, and as of what date?
- Who owns the insurer, and does it reinsure much of its annuity business with affiliates or offshore?
- What is my state's guaranty association limit for annuities, and does it apply to this contract?
- Would any part of my interest or index credits fall outside guaranty coverage?
- How much do I already have with this insurer, including life insurance?
- Would splitting this amount between two or three insurers keep each piece within my state's limit?
- What happens to my access to money if the insurer is placed in rehabilitation?
- Where is the guaranty association notice for this contract?
- How do I look up complaints against this insurer and the license of the person selling it?
Read This Before You Sign
A one-page checklist: the red flags in annuity and indexed universal life (IUL) sales, and the questions to ask before you sign anything. A one-page list for checking an insurer's ratings, ownership and your state's guaranty limit before you buy. We’ll email it to you.
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Sources
- FDIC: Financial Products That Are Not Insured by the FDIC (last updated May 12, 2026)
- SEC Investor.gov: Annuities (checked October 14, 2026)
- NOLHGA: How You're Protected, coverage levels by state (information as of June 1, 2025; checked October 14, 2026)
- NOLHGA: Frequently Asked Questions (checked October 14, 2026)
- NAIC: Model 520, Life and Health Insurance Guaranty Association Model Act (as printed 2018), Sections 3, 8 and 19
- California Life and Health Insurance Guarantee Association: FAQ (checked October 14, 2026)
- NAIC: Letter to Sen. Elizabeth Warren on private credit, private equity and affiliated transactions (September 24, 2026)
- AM Best: Guide to Best's Financial Strength Ratings (checked October 14, 2026)
- NAIC Capital Markets Bureau: Private Equity-Owned U.S. Insurer Investments, year-end 2024 (August 2025)
- U.S. Treasury, Federal Insurance Office: Annual Report on the Insurance Industry (September 2025)
The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.