States have guarantee funds which cover losses when insurance companies fail.Most are limited and may not cover the growth in a variable contract but Lehman Bros bond holders won't be getting anything from the state.According to this compilation of annuity guarantees for the 50 states, DC and Puerto Rico, http://www.annuityadvantage.com/stateguarantee.htm 42 of the 52 guarantees (over 80%) are limited to $100k. Even at 10%, an annuity value that provides $10k in annual income would be protected; at a more realistic 5%, an annuity value that provides just $5k in annual income will be protected.And with the financial issues that many states are facing, annuity holders may not be in any better shape than Lehman Brothers bondholders, should their annuity issuer fail.AJ
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