Last updated: February 2026 | By AnnuityJournal Editorial Team
Shopping for an annuity isn’t like buying a CD or picking a stock. Two contracts that look identical on the surface can produce wildly different outcomes depending on the fine print. This guide walks you through exactly how to compare annuities so you don’t miss anything that matters.
Key Takeaways
- Always compare the same annuity type — don’t compare a MYGA to a variable annuity
- Carrier financial strength (AM Best rating) matters as much as the interest rate
- The surrender schedule determines how long your money is locked up
- Free withdrawal provisions let you access 10% per year penalty-free on most contracts
- Get quotes from at least 3 carriers before committing — rates vary significantly
Step 1: Identify the Annuity Type You’re Comparing
Before you can compare annuities, you need to be comparing the same type. Mixing a fixed annuity with a variable annuity is like comparing a savings account to a stock portfolio — they serve different purposes.
The main types to compare within their own category:
- MYGA (Multi-Year Guaranteed Annuity): Fixed rate, guaranteed for 2–10 years. Compare on rate, term, and carrier rating.
- Fixed Indexed Annuity (FIA): Returns tied to a market index with a floor at 0%. Compare on participation rate, cap rate, and spread.
- Variable Annuity: Returns tied to investment subaccounts. Compare on fund selection, total fees, and rider options.
- SPIA/QLAC: Immediate or deferred income annuities. Compare on payout rate, payment options, and refund features.
Step 2: Compare Credited Rates Apples-to-Apples
For MYGAs and fixed annuities, the credited interest rate is the most important number — but only meaningful when compared for the same term length and premium amount.
A 5-year MYGA at 5.60% beats a 5-year MYGA at 5.45% — all else being equal. But all else is rarely equal. Check whether the rate is:
- Compound vs. simple interest: Simple interest (SI) products look competitive but pay less over time. A 5.60% SI rate is worth less than a 5.45% compound rate over 5+ years.
- New money rate vs. renewal rate: Some carriers offer a high initial rate that resets lower at renewal. Ask what the renewal rate history looks like.
- Minimum premium requirements: Some top rates require $100,000+ minimum. Confirm the rate applies to your deposit amount.
Step 3: Check Carrier Financial Strength
An annuity is only as good as the insurance company backing it. If the carrier becomes insolvent, your state guaranty association provides coverage — typically up to $250,000 per person per carrier — but claims can take years to resolve.
Only consider carriers rated A- or better by AM Best. The ratings to know:
| AM Best Rating | What It Means |
|---|---|
| A++, A+ | Superior financial strength |
| A, A- | Excellent financial strength |
| B++, B+ | Good — acceptable with caution |
| B and below | Avoid for annuity purchases |
A carrier offering 0.20% more yield but rated B++ is not worth the financial risk on a 10-year contract.
Step 4: Understand the Surrender Schedule
The surrender schedule tells you how long your money is committed and what you’ll pay if you need out early. Two contracts with identical rates can have very different surrender terms.
Key things to compare:
- Surrender period length: 3 years vs. 7 years vs. 10 years
- Initial penalty: Does it start at 7%, 9%, or 15%?
- Step-down schedule: How fast do penalties decrease each year?
- Market value adjustment (MVA): Some contracts adjust your surrender value based on current interest rates — this can add to or reduce your penalty
Step 5: Compare the Free Withdrawal Provision
Most annuities allow you to withdraw a percentage of your contract value each year without triggering surrender charges. This is your liquidity safety valve.
Standard provisions range from 10% per year to 15% per year. Some contracts offer cumulative free withdrawals — if you don’t withdraw in year one, you can take 20% in year two. Compare this carefully if you think you might need partial access during the surrender period.
Step 6: Evaluate Optional Riders
Riders add guaranteed benefits — lifetime income, enhanced death benefits, long-term care coverage — but they also add cost. When comparing two contracts that include riders:
- What exactly is guaranteed? (specific dollar amount vs. percentage of benefit base)
- What is the annual rider charge?
- Under what conditions does the benefit pay out?
- Is the benefit base calculated on premiums, account value, or a roll-up rate?
A GLWB rider charging 1.10% per year guaranteeing 5% annual withdrawals for life looks different than one charging 0.75% guaranteeing 4.5%. Do the math on your specific premium and expected withdrawal needs.
Step 7: Read the Renewal Terms
For fixed and MYGA annuities, what happens when your initial guarantee period ends? Some contracts:
- Automatically renew at a new declared rate (could be lower)
- Offer a penalty-free window (typically 30 days) to surrender without charges
- Convert to a declared-rate product with lower minimum guarantees
The best contracts give you full flexibility at renewal — take the new rate, do a 1035 exchange to a better product, or withdraw. Know what your options are before the initial period ends.
A Simple Comparison Checklist
| Factor | Carrier A | Carrier B | Carrier C |
|---|---|---|---|
| Credited rate | 5.60% | 5.45% | 5.55% |
| Simple or compound? | Compound | Compound | Simple |
| AM Best rating | A | A+ | A- |
| Surrender period | 5 years | 5 years | 7 years |
| Year 1 surrender charge | 8% | 7% | 9% |
| Free withdrawal | 10%/yr | 10%/yr | 10%/yr |
| Min premium | $10,000 | $25,000 | $10,000 |
Frequently Asked Questions
How many annuity quotes should I get?
Get at least three quotes from different carriers. Rate differences of 0.25%–0.50% are common for identical terms, and that spread compounds significantly over a 5–10 year contract.
Should I work with an independent agent or go direct?
Independent agents have access to multiple carriers and can compare options for you — captive agents only sell one company’s products. For best results, use an independent agent and also check rates directly on aggregator sites.
Is a higher interest rate always better?
Not always. A 0.25% higher rate from a B-rated carrier isn’t worth the added risk compared to an A-rated carrier. Rate, carrier strength, and surrender terms all matter together.
Can I compare annuities online?
Yes — rate aggregator sites show live MYGA rates by term. For indexed and variable annuities, comparison is harder because the products are more complex; working with an independent agent is recommended.
