Are Annuities Safe? What You Should Know About Insurance Company Ratings

Written by Ariel Stern Updated September 25, 2025

For many people, contractual guarantees are the main appeal of annuities. While some annuity contracts may only last a few years, others — such as immediate annuities — could last for decades.

While insurance companies are historically risk averse and stable, it’s still important to buy an annuity from a reputable insurer with strong financial ratings and proven track records.

We’re going to break down how to evaluate the safety of an immediate annuity so you can be confident in your decision when you decide to buy one.

Are Annuities FDIC Insured?

No, annuities are not FDIC or NCUA (for credit unions) insured. While you may have access to some limited coverage by your State Guaranty Association if your insurance company fails, they should not be relied on as a primary safety measure.

That is why choosing a solid insurance company is such an important part of your annuity purchase.

What To Look For When Assessing the Safety of an Immediate Annuity?

While you certainly should look over the product brochure and contract of the annuity you are purchasing, it’s just as important to assess the financial ratings of the insurance company that issues the annuity.

After all, you are paying the insurance company a large lump sum of money for the contractual guarantees, so the insurer better be able to live up to those guarantees.

So before you think about buying an annuity, you should head over to our insurance company ratings page and check out ratings of the company you are interested in.

What are Insurance Company Ratings?

Insurance company ratings evaluate the financial stability of the insurance company, not the annuity itself. When you look at the ratings, you should view them as a grade for how reliable the insurer is.

There are several rating agencies that assess insurers’ financial stability. We use three different rating agencies to get a range of assessments: A.M Best, Moody’s, and Standard & Poor’s.

These ratings are typically letter grades similar to grades you’d get in school. However, each rating agency has different scales and grades. For example, an “A” rating from A.M. Best is the third highest ranking (A++, A+, then A), but it is the sixth highest rating from Standard and Poor’s (AAA, AA+, AA, AA-, A+, then A).

How Should You Use Insurance Company Ratings?

We’d suggest that you consider the time horizon of your annuity when determining what rating you’d be comfortable with.

If you are buying a lifetime annuity, you should purchase from an insurer you are confident will be stable for the rest of your life. This might mean sacrificing the highest payout rate, but in the end it will repay you with peace of mind.

On the other hand, if your annuity is only going to last a few years, like a Multi-Year Guarantee Annuity, you may choose to rebalance how much you value the best rate over the best rated company.

The good news is that the highest rated companies are also sometimes very competitive. If you find a great annuity rate from a well-rated company, you can be more confident in your annuity purchase.

Other Than Company Ratings, What Should You Look For When Evaluating an Annuity’s Safety?

Another thing to consider when buying an annuity is the insurance company’s history and structure.

Company History

If you look in your quote report or click on the insurer on our insurance company ratings page, you’ll find the year in which the insurer was founded. Some of the insurers we work with have been around for over one hundred years.

While being older doesn’t necessarily mean safer, companies who have successfully navigated prior periods of economic hardship have a proven track record of maintaining their business during trying times.

Company Structure

The ownership structure of your insurance company could, in fact, affect the risks that insurer is taking with its underlying assets.

An insurance company may be:

• A publicly traded company
• A mutual insurance company
• A privately owned company
• Or a privately owned company affiliated with private equity

All of these insurance companies are under NAIC regulations and must maintain capital and reserves. But the first two—publicly traded companies and mutual insurance companies—have to disclose much about their underlying investments.

Private companies do not have to be as transparent about their underlying investments. While private companies aren’t inherently risky, those affiliated with private equity often pursue greater returns on the insurance company's assets. Generally speaking, these companies take on more risk in seeking these returns.

Again, this does not mean that a company owned by private equity will experience financial difficulty, but they may have riskier investment profiles. If you are worried about this, check out our guide on how to identify insurance companies owned by private equity.

How Can You Tell if An Insurance Company Is Safe?

It might seem difficult to assess the stability of an insurance company when shopping for an annuity. Let’s break down how to do this easily:

• Check the insurance company ratings from different rating agencies
• Determine whether the insurance company files investment disclosures (disclosing their investments is a good thing)
• Check the location of the parent company (we list parent companies on our insurance company ratings pages) — a U.S. domiciled company is good
• Check if it is a publicly traded or mutual insurance company — both indicate that the insurer subject to regulatory oversight and is not owned by private equity

The Bottom Line

Historically, insurance companies have been quite safe and adept at navigating periods of financial hardship.

Insurance companies are regulated by the National Association of Insurance Commissioners (NAIC) and must seek licensure of its products in each state. That can help you feel confident that the product and insurance company you are purchasing has been vetted by experienced professionals under the NAIC.

That being said, going with a reputable, well-rated company can give you the peace of mind most people look for in an annuity. Check the A.M. Best, Moody’s, and Standard and Poor’s ratings of your company. Look at when it was founded, where its parent company is located, and whether it is affiliated with private equity if you want even more insight.

If you need help evaluating an insurance company’s financial stability, call our U.S.-based annuity experts (866) 866-1999. We’re happy to answer any questions you may have about insurance company ratings and financial stability. We promise to give you honest answers without any sales pitches; we’re here to help.

Disclaimer: This content is provided for educational purposes only and is not a substitute for professional financial advice. We do not guarantee the accuracy, completeness, or timeliness of any information presented. Ratings and ownership information reflect public sources and may change over time. Decisions regarding annuities or insurance products should be made based on your personal financial situation and in consultation with a qualified financial professional. Past performance or stability of an insurer does not guarantee future results.

References:

• Alberts, D. Hamilton, L. & Sidhu, V. “US State Insurance Regulatory Scrutiny of Private Equity Investors in the Insurance Industry” Mayer Brown. June 24, 2024.
• "State Insurance Regulation". National Association of Insurance Commissioners and The Center For Insurance Policy and Research. 2011
• Wallace, C. “Private Equity’s Growing Role In Insurance: Rewards And Risks” Global Finance. September 8, 2025.