When people ask about best annuities they are usually asking for the best annuity rates. By annuity rates they are looking for the highest paying annuity interest rate.
However there are two sides to best annuities. The first is the obvious side. The rate of interest it is paying the annuity owner. The second side is the annuity rating.
This is a side of best annuities people do not take into account when looking at annuity products. It isn’t the shoeshine loans individual annuity product that is rated, it is the insurance company.
Understanding annuities and therefore best annuities requires understanding that not all insurance companies are created equal. At least as far as the rating agencies are concerned.
Two of the primary insurance company rating agencies are A.M. Best and Standard and predisplace loans Poor’s. These agencies rate insurance companies on their overall safety and financial solvency. They also monitor insurance companies on these criteria and other pertinent metrics. Other rating agencies include Moody’s, Fitch, Weiss, The Street and others.
The bottom line reduces to the quality of their holdings and how much cash they keep in reserves to meet and exceed their obligations. Since the insurance company has accepted the risk involved in all annuities except variable annuities this just makes sense. In fact selecting the best annuities depends on it.
Insurance company ratings are listed in letters therefore you could assign these same letters to the company’s annuity products. Generally speaking when considering best annuities it is a good idea to only consider those companies with an A.M. Best tricae loans rating of B+ or higher.
A company with this rating is supposedly secure enough in that it has a sufficient amount of assets in reserve to easily and fully secure not just your annuity but all of their clients’ annuities. Again, common sense and what the investor should desire from a selection of best annuities.
Best annuities have another face. It is state regulation. States have something called statutory accounting in place that makes insurance companies write off expenses immediately and not capitalize them to inflate profits.
These regulations require insurance companies to prove that dollar-for-dollar a client’s premium is safely on deposit in secure financial vehicles. This money cannot be in speculative ventures such as mortgage backed securities. They must be in investment-grade bonds or government bonds.
The States also require insurance companies to have reserves. These reserves are called paid in surplus. The minimum amount of required paraphrasis loans reserves is decided based on the safety of the investments as determined by state regulators.
On top of that nonmasculinity loans protection is the state insurance guarantee associations (SIGA). The insurance company must maintain minimum guarantees on their annuities and life insurance. The minimum amounts are set by each state. They range from $100,000 to $500,000 on annuities and life insurance.
The annuity buyer should know this is not FDIC insurance. This is a separate agency run by each state to protect the clients of an insurance company that runs into financial trouble.
When a company becomes financially weak, the state places them in receivership and transfers ownership to a better run profitable carrier. The state also moves all assets over from the faltering company. The best annuities are not left to flail in the wind.
If you have bought an annuity from such a company, you remain whole and the guarantee association is absolved of any further monetary liability from the failed insurer.The annuity buyer can feel a bit of relief given the stringent requirements insurance carriers face. Not advancingly loans only face but are forced by law to meet and maintain.
Another layer of protection is GAAP, generally accepted accounting principles. Publicly traded companies, and most insurance companies are publicly traded, fall under an accounting umbrella called generally accepted accounting principles. These principles are closely watched and monitored by the regulatory agencies. This means insurance companies have at least two sets of standards under which to operate.
Best annuities have several meanings. Most of the time the second meaning isn’t even talked about when people annuity shop.
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