Cathy Lawley's father passed away when she was two-years-old.
Her mom put money received from a malpractice lawsuit into an annuity that would start paying Lawley monthly when she turned 25.
"She wanted to set aside money to take care of me later in life," Cathy said.
Here's how an annuity works: You pay a premium to an insurance company.
The company takes a cut, invests your money, and pays you back a monthly sum over a fixed period or your lifetime.
In Lawley's case, Executive Life Insurance Company of New York was responsible for those payments and paid Lawley starting in 2006.
But last year, the company was declared insolvent.
Lawley says she's been informed by the New York Liquidation Bureau her payments will be reduced by more than half.
This is happening to more than 1,500 people nationwide including more than 60 people in Pennsylvania.
The consumers affected will lose a total of $920-million in annuity policy payments.
"It really makes me leery of insurance companies and investing going forward," Cathy said.
To avoid this situation?
"You want to look at things like Guaranty Association Cap limits," attorney Edward Stone said.
A state Guaranty Association covers payouts if an insurance company goes under.
But the max each state pays is different.
In Pennsylvania, the cap is $300,000.
Lawley's case falls under New York's Guaranty Association where the cap for nonresidents in some cases is $500,000.
And here's a critical point, if you invest more than the maximum, spread your money among several companies.
"Don't put all your eggs in one basket. Spread the risk among insurance companies," Stone said.
Getting large account values honored can be hard if your insurer fails.
Consumer Reports Money Adviser just published a report on annuities. It explains fixed immediate annuities and variable annuities and offers tips. A critical tip is to make sure you choose a safe insurer. Check its financial strength on WeissWatchdog.com.
Consumer Reports says it has found WeissWatchdog to be more impartial than Moody's or Standard & Poor's.
-Work with a fee-only financial planner who can suggest what portion of your investments to allocate to an annuity.
-Learn about add-ons and features like a death benefit or return-of-premium ride and cost-of-living protection
-Decide on ownership. Married couples can compare quotes for a joint annuity versus a single life annuity with survivor benefits.