Most fixed annuities don’t have fees that you see other than perhaps an annual policy fee (perhaps $25 - $50 per year), which is often waived if you invest a minimum specified amount (such as $25,000).
If there are no fixed annuity fees, than how does the insurance company make money? When you invest in a fixed annuity the insurance company agrees to pay you a fixed minimum rate, such as 3%. They then take your money and invest it in other things earning a higher return. They get to keep the difference.
Instead of charging a fixed annuity fee, the insurance company is paying you a guaranteed minimum rate so they can use your money to put in other, more lucrative investments.
So what happens if the insurance company’s other investments don’t pan out? The insurance industry is highly regulated, so they are required to have a specified amount of reserves; safe funds on hand, readily available to pay out what they owe. A company with plenty of reserves is in better financial condition than a company with less in reserve.
To assess the financial strength of an insurance company, look at their rating. A higher rating means the company is in better financial strength than a similar company with a lower rating.
