When Annuity Companies Actually Fail
- It’s rare—but it happens. Insurer liquidations in the U.S. are infrequent, but they do occur.
- Recent red flags you need to know about: In December 2024, regulators ordered Advantage Capital Group (A-CAP) and its subsidiaries to stop issuing new policies nationwide due to undercapitalization and risky parent-company investments. States, including Utah and South Carolina, issued suspension orders against subsidiaries like Sentinel Security Life and Atlantic Coast Life.
Expert Note: Worried about YOUR creditors taking your money? Read our guide on annuities in bankruptcy.
State Guaranty Associations: Your Safety Net by State
Every state, plus the District of Columbia and Puerto Rico, has a state guaranty association that protects annuity owners if their insurer fails. These protections are not the same as FDIC insurance.
- Coverage varies by state. Most states provide at least $250,000 in protection for annuities, but some offer higher limits.
- Connecticut: $500,000
- New York: $500,000
- North Carolina: $300,000 (up to $1,000,000 for structured settlements)
- Washington: $500,000
- Typical limits. Many states cap coverage at around $250,000–$300,000.
- Unallocated/group annuities. Some states cover them, others do not—rules differ.
- Multi-state failures. The National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) coordinates across states to ensure policies are either transferred or claims are paid.
Our Expert Advice: Before you commit to a long-term contract, it’s vital to understand the trade-off between risk and reward. Compare current annuity rates across all product types to find the highest guaranteed yields from companies that stay well within the safety limits of your state’s protections.
Corrected Coverage Language
- Coverage is not “insurance.” Instead, state guaranty associations protect annuity benefits up to statutory limits.
- Coverage applies to individual annuity contracts and their owners, not large corporate group contracts, unless explicitly covered.
The Claims Process—What Actually Happens
- Regulator intervention. A state insurance department steps in if an insurer shows signs of financial distress.
- Liquidation declared. Once insolvency is declared, the guaranty association activates to assess covered claims.
- Policy transfer or payouts. Contracts are often transferred to a financially stable insurer. If that’s not possible, the guaranty association pays claims up to state limits.
- Timing. Claim resolution can take weeks or months—be prepared for delays.
Suitability Safeguards & How to Protect Yourself
- Check insurer strength. Review ratings from agencies like AM Best before purchasing.
- Diversify providers. Spread annuity contracts across multiple insurers to stay below state limits.
- Know your state rules. Each state has unique coverage levels and rules for different annuity types.
- Avoid troubled insurers. Stay clear of companies under regulatory restrictions or scrutiny.
Our Expert Advice: The best way to avoid a company failure is to stay away from “risky” carriers before you sign a contract. An independent annuity broker doesn’t work for the insurance companies; we scan the entire market to filter out undercapitalized insurers and only recommend those with the highest financial strength ratings.
Notable Recent Failures
Understanding past failures can help you gauge the risks and prepare accordingly. Some notable recent failures include:
- American Chambers Life (2000): Entered receivership and liquidation, affecting many policyholders.
- Aviva (2013): Sold annuity block of business to Athene.
- Bankers Life (2019): Under rehabilitation in North Carolina, impacting thousands of policies.
- Colorado Bankers Life (2019): Also in rehabilitation, causing concerns among policyholders.
- A-CAP Group (2024): In December 2024, regulators in Utah and South Carolina ordered Advantage Capital Holdings (A-CAP) subsidiaries—including Sentinel Security Life and Atlantic Coast Life—to stop issuing new policies due to severe undercapitalization and risky investments. Contracts remain in force, but policyholders are under regulatory protection.
- Genworth: Still alive, but stop selling annuities.
What to Do Now
- Review your contracts. Confirm insurer ratings and state coverage limits.
- Split contracts if necessary. Keep values under your state’s guarantee limit.
- Get help. Contact The Annuity Expert for free quotes and to compare the safest, most cost-effective annuity options.
Pro Tip: If you’re concerned about a specific carrier mentioned in recent regulatory news, don’t wait for a liquidation to take action. Request a personalized annuity quote to see a side-by-side comparison of the safest, most stable A-rated carriers currently offering top-tier rates in your state.
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Questions From Our Readers
Has an annuity company ever failed?
Unfortunately, when annuity companies collapse, policyholders can face devastating losses.
What happens if an annuity company fails?
Although an unlikely outcome, a third party would first attempt to locate another insurer to take over the liabilities if your annuity provider becomes insolvent. If no other providers are available, you need not worry, as all annuities will be protected by the Financial Services Compensation Scheme (FSCS).
Has anyone lost money in an annuity?
The answer is yes; annuities can be a haven in unsteady markets and a reliable option for those retiring soon. However, under certain circumstances, they may not yield the expected results. But rest assured that if you seek an income stream during retirement, annuities offer guaranteed returns, so you don’t have to worry about volatile market conditions!
Are annuities 100% guaranteed?
Fixed-indexed annuities provide a secure haven for hard-earned cash, with 100% principal protection during market downturns. Alternatively, an income annuity gives you guaranteed payment streams over a specified period or throughout life–effectively turning your savings into retirement income.
What happens to my annuity if the insurance company fails?
If an insurance company fails, the annuity policyholders are typically protected by state guaranty associations. These associations provide coverage up to a certain limit, which varies by state. In the event of a company’s failure, the guaranty association will step in to ensure that policyholders receive their annuity benefits. However, it’s important to check with your state’s specific regulations to understand the coverage limits and protections available.
Are annuities guaranteed?
Variable annuities do not guarantee returns, and their performance is tied to the underlying investments, which can fluctuate. In the event that the issuing insurance company fails, the State Guaranty Association (SGA) provides a safety net, but coverage limits can vary by state.