Some annuities are too big of a gamble for insurers.Almost a year ago my accountant told me that I should purchase a variable annuity -- which is an insurance contract based on the ever-changing stock market -- from Prudential Financial. I would make a lump-sum payment to Prudential, which would pay me back with interest at a future time, usually at retirement.

A key component of this variable annuity was its "highest day" feature. My money would grow at a rate of 5 percent of the highest day that the market closed during the time in which I owned the annuity, until I began to withdraw funds.

Ultimately I decided not to purchase it. I figured that I'd have to pay Prudential a yearly fee to manage this money when I could manage it for free myself; variable annuities generally have too many bells and whistles, and since the market wasn't going to rise dramatically, I assumed that variable annuities had seen better days.

But maybe I should have. Earlier this month Federal Reserve Chairman Ben Bernanke announced that the Fed would beat down unemployment and boost the economy by buying up $40 billion a month of mortgage debt for an unlimited period of time.

Investors went on a buying binge, sending shares to their highest levels since 2007. As Republican presidential candidate Mitt Romney put it, the Fed was "printing money," and the market couldn't lose.

So if I'd invested in that variable annuity last November, when the Dow Jones Industrial Average (DJIA) was slightly more than 11,000, I would have seen a 21 percent increase in the base price that Prudential would use to calculate my 5 percent increase.

Insurers aren't up on annuities

Insurance companies have years of statistics to predict how long we will live, what we might die from, how many car accidents we could have and what our new roof should cost. In other words, they know more about what's going to happen to us than we do. But when it comes to the stock market, they are no better at predicting its ups and downs than the rest of us.

So why do insurers sell variable annuities based on the ever-changing stock market with a guaranteed return of 5, 6 or 7 percent? Because they think they are smart money managers. And with their huge portfolio, they move money quickly and cheaply between stocks, bonds and U.S. treasuries, keeping investments safe and guaranteeing your return -- in theory.

Some insurers are smart, but others, like Hartford Financial Services, are not. During the 2007 recession Hartford got its foot caught in the door and, like AIG, needed a bailout.

Even now The Hartford can't seem to stem the bleeding, so they are selling off their life insurance and annuities operations. Insurer Sun Life is also backing away from variable annuities.

Betting against the house

Variable annuities seem to be the one game in which ordinary investors can bet against the house -- the insurer -- and occasionally win. It could also be why annuities outsold traditional life insurance by more than 2 to 1 in 2011, according to research firm Celent. Insurers are continuing to see increased sales again this year, due largely to the type of indexed products that Prudential, the nation's second-largest life insurer, is selling. But even Prudential isn't immune from foot faults.

A recent New York Times article said that Prudential was backing away from its older annuities, including its Lifetime Seven program with a 7 percent guarantee, 2 percent more than its current program. The insurer said that it would open a short window to allow these annuityholders to invest more money, and then close the annuity to future investment by anyone.

"We saw a gold rush as investors rushed to get in on the vanishing 7 percent return," said my accountant. Future annuity buyers would have to settle for the same 5 percent return he offered to me.

Should you, or I, take the 5 percent deal? Who knows what Ben Bernanke, or the stock market, will do next. Your guess is as good as any insurer that's trying to get you to buy a variable annuity.