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Financially Reviewed By : George F. Shave III, RICP
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California is the fourth-largest insurance market in the world and the largest in the United States. To regulate annuity sales in the state, California has important provisions in place. The state also governs key features of annuities, such as premium tax, consumer protections and free-look periods.

“California has been at the forefront of providing legislation designed to protect consumers interested in utilizing annuities,” Retirement Income Certified Professional George F. Shave III told Annuity.org.

When you are ready to purchase an annuity in California, your insurance company and agent must follow the state provisions and best practices.

Buying an Annuity in California

Purchasing annuities in California will be different from buying within other states. Consider this: you have an aunt that lives in Nevada, and she purchased a fixed annuity from a well-known provider.

She tells you, “You should purchase the same annuity from the same company — it’s a great product!” You call your financial advisor, and you learn that the product with the same name has different rates and available riders in your state. How could this be?

First, the provider would need to be licensed in both Nevada and California to sell annuities to you and your aunt. Then, across the state border, the company and the products are subject to the rules established by each state.

“Annuities can be excellent products for helping Californians plan for, and be in, retirement.” —

During the purchase, it’s important to ask questions and thoroughly examine your contract.

“I would advise clients to be sure they understand the terms of the annuity contract they are buying,” Shave said. “Annuities can be excellent products for helping Californians plan for, and be in, retirement.”

Before your purchase is finalized, you will have a free-look period that allows you to review your contract and cancel if needed. This period is a minimum of 10 days in California, and 30 days for senior residents.

Annuity Providers in California

Companies must be licensed in California to sell annuities in the state. Even if a company is licensed in multiple states and it sells an annuity product elsewhere, that product will likely have different rates, benefits and limitations in California.

With the vast range of annuity products available in California, it is advisable to speak with a financial professional and ask questions to determine which annuity can best meet your needs.

Annuity Products Available in California

Product Name Rate AM Best Rating
GuaranteeShield 1.75% A-
Palladium MYG 250k+ 2.10% A
SecureFore 3 100k+ 1.65% A
Guarantee Platinum 2.65% A-
Guarantee Choice 100k+ 1.90% A+

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Annuity & Other Retirement Taxes in California

California currently issues a state premium tax on annuities, totaling 2.35 percent. Annuity premiums on profit-sharing and qualified pension plans are taxed at a rate of 0.5 percent.

Early retirement plan withdrawals are subject to a 10 percent federal penalty. In addition, California assesses a 2.5 percent penalty on early distributions, including those from annuities and IRAs.

California residents have state income tax ranging between 1 percent and 13.3 percent, depending on filing status and taxable income. The state does not have taxation on Social Security benefits, and there are no California-issued estate nor inheritance taxes.

Annuity Regulations in California

The California Department of Insurance, or CDI, governs all annuity providers licensed in the state. According to its website, “The insurance market place has changed dramatically over time, but consumer protection continues to be the core of CDI’s mission.”

The sale of annuities in California must align with the standards in the Annuity Suitability Reform Bill, AB 689. This legislation was authored by Assembly Budget Committee Chair Bob Blumenfield and backed by the California Department of Insurance.

It mandates that insurers evaluate the consumer’s age, income, financial objectives and other factors. Then, the insurer must verify that the annuity purchase is appropriate for the consumer.

Senate Bill 620, authored by former Senator Jack Scott, is another important piece of legislation that provided a code of conduct for advisors.

Senate Bill 620 affects the sale of annuities in California in the following ways:
  • Restrictions on advertising practices
  • Restrictions & disclosures when making presentations in clients’ homes
  • Better replacement standards
  • Guidelines to regulate the sale of annuities specific to Medi-Cal eligibility
  • Restrictions on how variable annuity funds are invested during the free-look period
  • Restrictions on commission payouts to active members of the State Bar of California
  • Continuing education requirements

“California was the first state in the nation to mandate annuity training for advisors,” Shave said. “It started with an initial eight-hour training requirement and continues each license renewal with four hours of ongoing training. The goal here, to assure that we are putting better advisors in front of consumers.”

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Are Annuities Protected From Creditors in California?

California has asset protection laws in place to benefit residents. For unmatured life policies including annuities, the exempt amounts are $9,700 for an individual and $19,400 for a married couple. A money judgment can be enforced beyond these dollar amounts.

Benefits from matured annuity policies are exempt to the extent reasonably necessary to support the debtor and their spouse and dependents. If you purchase an annuity in California while a resident of the state, the contract is governed by California law — even if you later move to another state with different asset protection rules.

What Is the California Life & Health Insurance Guarantee Association?

The California Life & Health Insurance Guarantee Association exists to protect annuity owners. In the unlikely event of the issuing annuity company’s insolvency, or inability to pay claims, the state guaranty association can continue your coverage.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

However, if you and your spouse each have an annuity contract, the limit applies to each of you separately. The Guarantee Association protects individual retirement annuities up to the same limit if all other conditions are met.

Calculating Annuity Protection

Additional Resources for California Annuity Buyers

As you consider your annuity options in California, review the company ratings to gauge the financial stability of the issuing provider.
A financial advisor or annuity expert can answer your questions and guide you in the right direction as you pursue your financial goals.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: September 3, 2021

11 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Asset Protection Society. (n.d.). California Asset Protection Summary. Retrieved from https://assetprotectionsociety.org/california-state-asset-protection-laws/
  2. Blumenfield, B. (2011, June 22). AB 689 Assembly Bill. Retrieved from http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0651-0700/ab_689_cfa_20110620_161851_sen_comm.html
  3. California Department of Insurance. (n.d.). About the Department. Retrieved from http://www.insurance.ca.gov/0500-about-us/02-department/
  4. California Department of Insurance. (n.d.). Life Insurance and Annuities. Retrieved from https://www.insurance.ca.gov/01-consumers/105-type/95-guides/07-life/upload/LifeInsuranceAndAnnuities-2.pdf
  5. California Legislation Information. (n.d.). Article 9. Suitability Requirements for Annuity Transactions. Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=INS&division=2.&title=&part=2.&chapter=5.&article=9.
  6. California Life & Health Insurance Guarantee Association. (n.d.). Frequently Asked Questions. Retrieved from https://www.califega.org/FAQ
  7. Kiplinger. (2020, December). California State Tax Guide for Retirees. Retrieved from https://www.kiplinger.com/kiplinger-tools/retirement/t055-s001-state-by-state-guide-to-taxes-on-retirees/index.php?map=&state_id=5&state=California
  8. National Association of Insurance Commissioners. (2020, December). Retaliation Guide. Retrieved from https://content.naic.org/sites/default/files/publication-ret-zu-retaliation-volume-one.pdf
  9. Scott, J. (2003, February 20). SB 620 Senate Bill. Retrieved from http://www.leginfo.ca.gov/pub/03-04/bill/sen/sb_0601-0650/sb_620_bill_20030702_amended_asm.html
  10. Shave, G. (2021, July 1). Email interview with Annuity.org.
  11. State of California Franchise Tax Board. (2020). 2020 California Tax Rate Schedules. Retrieved from https://www.ftb.ca.gov/forms/2020/2020-California-Tax-Rate-Schedules.pdf