Are structured annuities FDIC insured?


No, FDIC or the Federal Deposit Insurance Corporation covers deposits in banks, not in annuities. The FDIC is an agency of the US government that works to protect banks and their depositors. It pays back the depositor up to a specified amount in case the insured bank goes belly up and can't give back the depositor's money. Again, structured annuities do not fall under the protection of the FDIC.

The entity that "insures" or guarantees the payment of a structured annuity (or any kind of annuity for that matter) is the annuity issuer. In most cases, the annuity issuer is the insurance company.

However, most states have what is called the Guaranty Fund. All insurance companies in that state are required to contribute to this fund. In the rare event that an insurance company goes belly up (and again, let us stress that this rarely happens), the guaranty fund will answer for the money owed to you. It is important to note, though, that the guaranteed payments are limited and may vary from one state to another.

That said, insurance companies are rather stable institutions because they more or less invest in the "safer" investment options. Depending on how the state regulates the investments of the insurance companies, a bulk of the funds go to solid investment vehicles such as bonds. Some states may also minimize what percent of the funds may be invested in other investment vehicles such as stocks, real estate and so on.

However, to be on the really safe side, you should do your homework to see which insurance company is the best place for your money. Here's what you can do:

  • Look at the insurance company's credit rating. A good rating would be at least an A+, with the highest being a triple A. These ratings are given by credit bureaus such as Standard & Poor's or Moody's and give an indication of the financial stability and health of an institution.
  • Study the company's reputation. Does it have the reputation of paying claims promptly or of denying them? How are their investments made?
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