Every promise in an annuity contract is backed by the financial strength and claims-paying ability of the issuing insurance company. Not by the government, and not by the agent. So before you look at caps and riders, look at the company.
What the rating agencies do
Independent agencies grade insurance companies on their ability to pay claims. The one you will see most often is AM Best, which has rated insurers since 1899. S&P, Moody's, and Fitch also rate many carriers.
A report card on an insurance company's financial strength. A++ and A+ are Superior. A and A- are Excellent. Grades below that deserve real scrutiny for a long-term promise like an annuity.
The AM Best scale, simplified
| Rating | Category | Our plain read |
|---|---|---|
| A++ / A+ | Superior | The strongest tier |
| A / A- | Excellent | Solid. Most quality annuities live here or above |
| B++ / B+ | Good | Ask hard questions before committing decades |
| B and below | Fair or worse | Generally not where retirement income belongs |
Why ratings matter more for annuities than most products
A homeowner's policy renews every year, so you can switch carriers easily. An annuity may need to pay you income for 30 years or more. You are choosing a decades-long counterparty, and a higher cap from a weak company is not a bargain.
Beyond the letter grade
- How long has the company been in business? Longevity through past downturns says something.
- How large is the company, and is annuity business a core line or a sideline?
- Has the rating been upgraded or downgraded recently, and why?
The safety net behind the safety net
State guaranty associations provide limited protection if an insurer fails, commonly $250,000 per annuity contract, though limits vary by state. This is a backstop, not a substitute for choosing a strong company. See your state page for your state's coverage.
How we handle this
Because we are independent, we can compare products across many companies and weigh financial strength alongside the contract terms. We do not name or promote specific carriers on this site. On a call, we walk you through the actual ratings of any company you are considering, using current data.