Ask the Expert: Is my annuity safe?
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Q: I have an annuity and I was wondering will my money be safe? What happens if my annuity company goes out of business?
Q: I have an annuity and I was wondering will my money be safe? What happens if my annuity company goes out of business?A: Unlike savings and checking accounts, your annuity is not insured by the FDIC, even if the annuity was purchased at a bank. If your annuity is with a top rated insurer that has an A+ rating you should be safe but sometimes insurers do become insolvent. Typically the policies are protected by the guaranty association in your state. Additionally, other insurance companies may directly inject funds to avoid or reduce reduction in scheduled benefit payments. This is what happened to Executive Life Insurance Company of New York which originally went into receivership in the early 1990s and determined additional shortfalls in 2007. In this case, Guaranty Association Benefits Company (GABC), a not-for-profit entity that was created to accept the obligations of the Executive Life Insurance Company of New York (ELNY) in liquidation. The GABC became responsible for making payments to payees and beneficiaries as of August 2013 and began making reduced benefits payments on November 18, 2013.
In addition, the ELNY Hardship fund was established by life insurance companies following the liquidation of ELNY. A $100 million fund was created to provide relief to 1,500 payees and beneficiaries whose benefits were decreased because of they liquidation.