Key Points
- Annuities offer competitive yields but are not covered by FDIC insurance.
- Each U.S. state has a guaranty association that protects annuity holders up to a certain limit.
- Spreading funds across multiple carriers can reduce risk beyond state coverage limits.
Annuities are gaining popularity as interest rates on savings accounts have been falling. It’s not uncommon to see fixed annuities advertised with returns above 5%, drawing in savers looking for better long-term options. But unlike savings accounts or certificates of deposit, annuities aren’t issued by banks and that means they aren’t protected by the Federal Deposit Insurance Corporation (FDIC).
Instead, annuities are insurance products, regulated at the state level. So what happens if the insurer behind your annuity fails? The answer lies with your state’s insurance guaranty association.
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What Are State Guaranty Associations?
Every U.S. state, plus the District of Columbia and Puerto Rico, has a life and health insurance guaranty association. These nonprofit entities step in when an insurer becomes insolvent. Their main job is to protect policyholders and ensure that benefits, including annuity payments, continue, up to a set limit.
In most states, that limit is $250,000 per individual per insurer. A few states offer higher protection:
- Connecticut and New York offer up to $500,000 in coverage.
- California protects 80% of the annuity's value, up to $250,000.
- States like Florida, Georgia, and Wisconsin have $300,000 limits.
Each insurance company selling annuities must belong to these associations in every state they operate. The guaranty association is funded by the industry itself: insurers pay assessments to cover claims when one of their peers fails.
For example, Gainbridge is a popular annuity company that operates in 49 states.
State Guaranty Association Coverage By State
Here's a full list of each state's limits:
State | Coverage Limit |
|---|---|
Alabama | $300,000 |
Alaska | $250,000 |
Arizona | $250,000 |
Arkansas | $300,000 |
California | 80% of $250,000 |
Colorado | $300,000 |
Connecticut | $500,000 |
Deleware | $250,000 |
District of Columbia | $300,000 |
Florida | $300,000 |
Georgia | $300,000 |
Hawaii | $250,000 |
Idaho | $250,000 |
Illinois | $250,000 |
Indiana | $250,000 |
Iowa | $250,000 |
Kansas | $250,000 |
Kentucky | $250,000 |
Louisiana | $250,000 |
Maine | $250,000 |
Maryland | $250,000 |
Massachusetts | $250,000 |
Michigan | $250,000 |
Minnesota | $250,000 |
Mississippi | $250,000 |
Missouri | $250,000 |
Montana | $250,000 |
Nebraska | $250,000 |
Nevada | $250,000 |
New Hampshire | $250,000 |
New Jersey | $100,000 or $500,000 |
New Mexico | $250,000 |
New York | $500,000 |
North Carolina | $300,000 |
North Dakota | $250,000 |
Ohio | $250,000 |
Oklahoma | $300,000 |
Oregon | $250,000 |
Pennsylvania | $250,000 |
Rhode Island | $250,000 |
South Carolina | $300,000 |
South Dakota | $250,000 |
Tennessee | $250,000 |
Texas | $250,000 |
Utah | $250,000 |
Vermont | $250,000 |
Virginia | $250,000 |
Washington | $500,000 |
West Virginia | $250,000 |
Wisconsin | $300,000 |
Wyoming | $250,000 |
How Coverage Works In Practice
If an insurer becomes financially impaired or insolvent, the state guaranty association takes action. This often means transferring contracts to a healthier insurer or directly paying claims within the state's coverage limits. In some situations, the association may collect additional assessments from member insurers to fund payouts.
Coverage varies by state law, but most policies, including fixed annuities, immediate annuities, and deferred annuities, are eligible. However, it’s important to remember that:
- Only licensed insurers are covered.
- Business entities may have limited or no protection.
- Structured settlement annuities may be treated differently.
To check your state’s specific limits, you can consult the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA).
Strategies To Reduce Risk
Because guaranty association coverage is limited, financial professionals often recommend splitting large annuity purchases among several insurers. For example, if you want to invest $600,000 in annuities and your state’s limit is $250,000, spreading the money across three different insurers can ensure full coverage.
It’s also smart to research the financial strength of insurers before buying. Ratings from firms like AM Best, Moody’s, and S&P provide insights into an insurance company’s stability.
In short, while annuities don’t have the FDIC’s or NCUA's federal protection, they’re not without safeguards. State guaranty associations provide a meaningful backstop and for many savers, that’s enough peace of mind to consider annuities as part of their retirement strategy.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.