This is a tricky question because we get this one all of the time, yet it always leads to confusion. The reason this happens is because it ends up using terminology that is used for the guaranteed payment type of annuity.
This question is, “Is my annuity guaranteed? What are my annuity guarantees?” Can you trust the promise that your annuity will pay you for the future? How do you know the insurance company will always honor your annuity?
This is a good question, because we all know, despite our best efforts, that justice does not always prevail. Theft occurs daily and victims suffer without any retribution or reparation. So how do we know this won’t be the same case with our annuity?
Can You Trust Annuity Guarantees?
The honest answer is, we don’t know if our annuity is guaranteed. Annuity guarantees are handed out with every annuity, but what happens if the insurance company who collected your investment from you throughout all of these years ends up bankrupt?
What happens when you’ve purchase an annuity and the company closes and fails? You technically won’t even be able to touch the money until almost sixty years old without suffering the ten percent penalty. So you’ll want to leave it alone.
This is why it is absolutely important to check out your insurance company. Make sure they have your complete confidence before doing business with them. Purchase annuities only from these companies. How can you figure out which insurance companies to trust?
Annuity Guaranteed by Trusted Insurance Companies
You can find out which insurance companies you should trust mainly by checking their credit rating. A credit rating is a score given by the large credit bureaus who try to regulate the market by informing everyone of a company’s financial health and trustworthiness. You can access these ratings on the internet or ask your insurance agent to obtain them for you.
All of the credit bureau companies have different grading scales, but generally you want to stay in the “A” or “AA” or better range. It works very much like school. An “A” is a good grade, and you may see those with “A+” or even “A-“ which is acceptable.
State Annuity Guarantees Your Annuity Guaranteed!
There exists state annuity guarantees that help to protect you if an insurance company closes its doors. If the company fails, then the state passes out money from their fund to keep your annuity guaranteed up to a point. The coverage varies from state to state and is usually pretty limited, but it’s better than nothing. This is probably the only real way to get your annuity guaranteed, but even it is not in full.