The question you have asked, which I'm going to answer quickly, is, “are annuities FDIC insured?” No, but you need to hang in there for more than that. I will go over how annuities are protected and what you need to look forward to from a claims-paying ability standpoint.
So are annuities FDIC insured? F stands for federal, and people are familiar with FDIC because when you buy CDs at the bank or something like that, they have FDIC-insured protection. There are arguments against FDIC because of all the debt that we deal with in Washington DC. But, in my opinion, FDIC is still your best protection from a coverage standpoint.
Now, fixed annuities are regulated at the state level, and each state has a guarantee fund that covers fixed annuities up to a certain amount. If you're buying a variable annuity, that's a security, not a fixed annuity. Also, it's not regulated at the state level; it’s regulated by the stockbroker guys, FINRA, the SEC, et cetera. If you're buying through a brokerage firm, there's what's called SIPC insurance, which is also very good.
Now, fixed annuities are covered at the state level. To find the coverage information for your specific state, go to the website N-O-L-H-G-A.com. All states are different. Nothing's uniform in the annuity industry. So are annuities FDIC insured? The extensive answer, no, but there is/are coverage, coverages for you based upon the annuity type you buy and also based upon the state residence that you're living in.
So a person called me up and was looking at a five-year MYGA. He was also looking at shorter-term CDs. And he goes, "Well, I'm concerned with the coverage of the MYGAs because I love the CD protection, et cetera." By the way, MYGAs are fixed-rate annuities that are the annuity version of a CD. The rates for MYGAs are typically a little bit higher than CDs if you go out past the three years. So in this scenario, what we ended up doing was laddering that portfolio of a fixed rate. So, in other words, he had $500,000. So for 300,000 of that, he bought three CDs and then bought two MYGAs.
Now, what we did with the MYGAs is we made sure that he bought them underneath that state guarantee fund limitation for his state. Then we split it between a couple of carriers because the rules are, it's per company, per carrier, per owner. So he bought XYZ company and then ABC company, and a state guarantee fund covered him. Therefore, he had FDIC protection with his CDs.
So once again, annuities are not FDIC insured, but that's okay because NOLHGA, a state-guaranteed fund, backs fixed annuities.
Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.