Bonus Annuity Breakdown

Bonus annuities are fixed, fixed indexed, or variable annuities that offer the buyer a bonus rate on any premium the investor adds to the policy.  Some annuity products only give a premium one time on the initial deposit, and some have the ability to give the bonus on all premiums you add for a specified amount of time.  For example, if you started your annuity with $100,000 and the product offered a 5% bonus on any premium deposits for the first 3 years, your account would have $105,000 working for you from the first day of the policy contract.  And anytime you added more premium for the first 3 years you would also receive a bonus on that new money.  A good question to ask your agent is “Will any subsequent premium additions start my surrender charge over”.  

In most cases, the bonus is touted as a way to offset the surrender charges an annuity owner faces when he or she moves an annuity from one company to another.  The trade-off is that with a bonus annuity the surrender period is usually longer than a non-bonus annuity, but there are exceptions to the rule.

When reviewing bonus annuities with your advisor, make sure you are comfortable with the cost of surrendering an annuity, life insurance, etc in order to purchase the bonus annuity. Another question should be asked to find out if he or she is vested immediately in the bonus and how the bonus pays out upon death. Regardless of being a fixed or variable annuity, a bonus annuity will still grow tax-deferred for as long as the annuitant owns it.

To do detailed searches on all of the Bonus Annuities available check out our “Compare Annuity” section.  You will be given 2 minutes to browse around and then it will ask you to log in to have unlimited access going forward.