Annuity companies to avoid is essential for ensuring a secure and stable retirement income. As you shift from saving to withdrawing funds in retirement, annuities can provide guaranteed income for life, supplementing Social Security and pension benefits.
However, not all annuity providers offer the same level of financial security, transparency, or customer service.
Annuities are insurance contracts in which an individual makes a lump sum or series of payments in exchange for future payouts.
These payouts can begin immediately or be deferred based on the annuity type. While annuities can be a valuable tool, choosing the wrong provider can lead to excessive fees, poor investment performance, or even financial instability.
Some annuity companies have a history of poor financial ratings, high surrender charges, hidden fees, or unfavorable contract terms that can impact retirees’ long-term financial security.
It’s crucial to carefully research providers, paying attention to their reputation, financial health, and customer reviews before making a commitment.
In this article, we’ll examine 10 annuity companies to avoid, focusing on those with a track record of customer complaints, low financial ratings, or policies that may not be in your best interest. Making an informed choice now can help protect your retirement savings.
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What Are Annuities?
Annuities are financial products designed to provide a steady stream of income, often for retirement. They function as insurance contracts where you invest a lump sum or make periodic contributions over time.
Depending on the type of annuity, your balance may grow through investment returns or interest accumulation.
When you choose to start receiving payments, you can opt for a fixed term or lifetime payouts, ensuring financial security for the long run.
Annuities can be a useful tool for individuals seeking stable, predictable income, especially when planning for retirement or long-term financial needs.
How we Picked these Companies
To select the annuity companies for our list, we used the Life Insurer Financial Report published in 2022 to pick out companies with A.M. Best ratings of B++ and below and Comdex scores of under 50. A.M.
Best ratings include A++ (Superior), A+ (Superior), A (Excellent), A- (Excellent), B++ (Very Good), B+ (Good), B, B-, C++, C+, C, C-, D (all Vulnerable), E (Under State Supervision), F (In Liquidation), and S (Rating Suspended).
These ratings highlight the financial strength of the company, with ratings of B++ and below indicating that the company’s financial strength falls short, especially in comparison to its competitors.
The Comdex Score is a ranking from 1-100 and represents a composite score of all ratings assigned by rating agencies.
A Comdex score of 49 would mean that the company in question is ranked higher than 48% of all insurance companies.
The higher a company’s Comdex score, the better it is considered to be. We have thus ranked these companies based on their A.M. Best ratings and Comdex scores, from the highest to the lowest in both metrics.
10 Annuity Companies to Avoid in the US
Here are 10 annuity companies to avoid in the US today:
1. CL Life & Annuity Insurance Company
- AM Best Rating: B++
- Comdex Score: 49
CL Life & Annuity Insurance Company is a company that was founded in 1978. It falls under the wing of Crestline Assurance Holdings LLC. The company is based in Fort Worth, Texas.
CL Life & Annuity Insurance Company offers flexible retirement solutions and high-value retirement savings tools. It provides clients with single premium tax-deferred annuities with interest rates over a time frame of one to five years, among more.
While this company’s A.M. Best rating of B++ and Comdex score of 49 show that it’s doing alright financially, for those looking to have an ironclad annuity and insurance provider, this company may not be the right pick.
Metlife, Inc. (NYSE:MET), UnitedHealth Group Inc. (NYSE:UNH), and Markel Corporation (NYSE:MKL) would be preferred alternatives for those looking for excellent insurance companies.
2. Talcott Resolution Life Insurance Company
- AM Best Rating: B++
- Comdex Score: 47
Talcott Resolution Life Insurance Company is an insurance company founded in 1902 and based in Windsor, Connecticut. Its parent organization is TR RE, Ltd.
The company claims to oversee and administer about one million contracts and $90 billion in pro-forma assets under management.
Talcott Resolution Life Insurance Company has a B++ rating at A.M. Best, a BBB (Good) rating at S&P, and a Baa3 (Adequate) rating at Moody’s.
Like the company above, these ratings and the Comdex score of 47 imply that the company’s financial health is merely adequate at the moment, so it is not a very strong contender within the annuity space compared to its competitors.
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3. Talcott Resolution L&A Insurance Company
- AM Best Rating: B++
- Comdex Score: 47
Talcott Resolution L&A Insurance Company is part of the Talcott Financial Group, like Talcott Resolution Life Insurance Company above. It is based in Windsor, Connecticut, and it was incorporated in 1996.
The company provides risk management and annuity business technology solutions within the life insurance industry.
Talcott Resolution Life Insurance Company also offers consulting services and operates globally. This company also has a B++ rating at A.M.
Best, a BBB (Good) rating at S&P, and a Baa3 (Adequate) rating at Moody’s alongside a Comdex score of 47, implying its financial health is in the same condition as the company before it.
4. EquiTrust Life Insurance Company
- AM Best Rating: B++
- Comdex Score: 39
EquiTrust Life Insurance Company is based in West Des Moines, Iowa. The company was founded in 1966.
EquiTrust Life Insurance Company provides competitive, client-friendly annuity and life insurance products through its network of independent sales representatives.
It has over $25.2 billion in assets and $23.5 billion in liabilities, making its assets-to-liability ratio come up to 107.42%.
EquiTrust Life Insurance Company has a B++ rating at A.M. Best and a BBB+ (Good) rating at S&P, alongside a Comdex score of 39.
For those looking for insurance companies with better financial health, Metlife, Inc. (NYSE:MET), UnitedHealth Group Inc. (NYSE:UNH), and Markel Corporation (NYSE:MKL) can be suitable alternatives.
5. Investors Heritage Life Insurance Company
- AM Best Rating: B++
- Comdex Score: 39
Investors Heritage Life Insurance Company was founded in 1960. The company is based in Frankfort, Kentucky. It is affiliated with the Aquarian Holdings Group, which acquired it in 2018.
In 2018, the acquisition of Investors Heritage Life Insurance Company took the company private. The company has over $1.9 billion in assets and $1.7 billion in liabilities, bringing its assets-to-liability ratio up to 111.41%.
Investors Heritage Life Insurance Company has a Comdex score of 39 and an A.M. Best rating of B++, while Fitch has a BBB- rating on it.
6. SILAC Insurance Company
- AM Best Rating: B+
- Comdex Score: N/A
SILAC Insurance Company, headquartered in Salt Lake City, Utah, is an annuity provider affiliated with Sterling Financial Group, Inc.
In addition to annuities, the company offers Medicare Supplement insurance, life insurance, short-stay nursing home insurance, and hospital indemnity insurance.
With over $6.7 billion in assets and $6.5 billion in liabilities, SILAC maintains a strong financial position, reflected in its assets-to-liability ratio of 104.17%.
This stability reinforces its ability to meet policyholder obligations, making it a reliable choice for individuals seeking financial security through annuities and supplemental insurance products.
7. ELCO Mutual Life & Annuity
- AM Best Rating: B+
- Comdex Score: 35
ELCO Mutual Life & Annuity, headquartered in Lake Bluff, Illinois, specializes in annuity products, including flexible premium deferred annuities, single premium deferred annuities, and Medicaid-compliant annuities.
The company holds a BBB- rating from KBRA and a B+ rating from A.M. Best, indicating moderate financial strength. Additionally,
its Comdex score of 35 places it below many competitors in overall financial stability. Despite these ratings, ELCO Mutual remains a viable option for individuals seeking specialized annuity solutions, particularly those requiring Medicaid-compliant options.
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8. Genworth Life & Annuity Insurance Company
- AM Best Rating: B
- Comdex Score: 32
Genworth Life & Annuity Insurance Company, founded in 1871 and headquartered in Richmond, Virginia, specializes in long-term care insurance and mortgage insurance.
With over $13.5 billion in assets and $12.7 billion in liabilities, the company maintains an assets-to-liability ratio of 106.05%, indicating a modest financial cushion.
However, Moody’s rates Genworth at B3 (Poor), signaling concerns about its financial strength and long-term stability.
While Genworth remains a key player in the long-term care insurance market, potential policyholders should carefully assess its ratings and financial health before committing to a policy.
9. Genworth Life Insurance Company of New York
- AM Best Rating: C++
- Comdex Score: 32
Genworth Life Insurance Company of New York, founded in 1988, operates as a subsidiary of Genworth Life Insurance Company.
Headquartered in New York, it manages $6.9 billion in assets against $6.7 billion in liabilities, resulting in an assets-to-liability ratio of 103.14%.
Despite maintaining a slight financial surplus, A.M. Best rates the company at C++ and Moody’s assigns it a Caa1 (Very Poor) rating, indicating significant financial concerns.
Given these ratings, potential policyholders should carefully evaluate the company’s financial stability and ability to meet long-term obligations before considering its insurance products.
10. Colorado Bankers Life Insurance Company
- AM Best Rating: E
- Comdex Score: N/A
Colorado Bankers Life Insurance Company, headquartered in Durham, North Carolina, was founded in 1974.
It primarily offers individually underwritten supplemental coverages and annuities for employer-sponsored plans, government programs, and individual markets.
The company holds the lowest A.M. Best rating on our list, largely due to financial instability. In 2019, a court ruling placed the company into rehabilitation, significantly impacting its financial standing and ability to operate effectively.
Given its current status, potential policyholders should exercise caution and thoroughly assess the company’s financial health before committing to any insurance or annuity products.
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Are Annuities a Good Investment?
Annuities can be a safe and reliable way to grow your money, offering guaranteed returns and financial security.
Unlike stocks, they protect your principal investment from market downturns, making them ideal for risk-averse investors.
However, annuities lack the high-growth potential of stocks and other market-driven investments. Additionally, your money is often locked in for a set period, limiting flexibility.
Before purchasing an annuity, carefully assess your investment goals, time horizon, and risk tolerance. If stability and predictable income are your priorities, an annuity could be a solid option. However, if you seek higher returns, other investments may be better suited.
FAQs
Why should I avoid certain annuity companies?
Some annuity providers have high fees, poor financial stability, low returns, or unfavorable contract terms that can negatively impact your retirement income.
How can I identify a risky annuity company?
Look for red flags such as excessive surrender charges, hidden fees, poor customer reviews, and low financial ratings from agencies like AM Best or Moody’s.
Are all annuities bad investments?
No, annuities can be a valuable retirement tool when chosen carefully. The key is to select a reputable provider with transparent terms and strong financial health.
What are the biggest risks with annuities?
The main risks include illiquidity, high fees, low payout rates, and the potential for the insurance company to become financially unstable.
How can I ensure I choose a reliable annuity provider?
Research the company’s financial strength, read customer reviews, compare fees and benefits, and consult a financial advisor before committing.
Conclusion
Annuity companies to avoid include those with high fees, poor financial stability, and restrictive contract terms.
By researching financial ratings, customer reviews, and policy details, you can steer clear of unreliable providers. Working with a trusted financial advisor can also help you make informed decisions.
An annuity should provide long-term financial security, not unexpected risks. Selecting a reputable company ensures that your investment serves its intended purpose—offering guaranteed income and peace of mind throughout your retirement.
References
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