Annuitiies

Hi Virgil,

Annuities are backed by the insurance companies that issue them. The primary way to assess the credit worthiness of the issuing insurance company is to check their credit ratings across a number of Credit Rating Agencies such as Moody's, Standard & Poor's and A.M. Best.

Recently these credit rating agencies have come under fire for not adequately assessing the risks involved with sub prime mortgages that were packaged into securities (Mortgage Backed Secuirities) which were rated by these agencies (who were being paid by the packagers) and sold off to investors...we are all witnessing the results of that.

If you want to buy an annuity one way to hedge the risk associated with an insurer going under is to spread your investment across multiple insurance companies by buying annuities from more than one insurance company.

As with all purchasing decisions it is best to get multiple quotes and to talk with people that don't have an interest in whether you purchase or not - aka don't only talk to brokers. You may want to speak with a fee only certified financial advisor.

Some reference sites:
http://en.wikipedia.org/wiki/Life_annuity
http://en.wikipedia.org/wiki/Credit_rating_agency