What is a Bonus Annuity?
Bonus annuities are a type of Fixed or Fixed Index Annuity that pay an upfront premium bonus. The bonus is paid as a percent of your original purchase premium. A rule of thumb is longer annuity contracts usually pay a higher bonus.
If you are looking for an accumulation product that pays a guaranteed interest rate for the entire annuity contract you may want to look at fixed annuity rates instead.
For example, if you purchase a bonus annuity with a 5% premium bonus for $100,000 you would receive a $5,000 bonus – making your annuity’s account value $105,000.
Annuity Providers Offering Bonus Annuities
| Carrier/Product Name | AM Best | Max Age | Minimum | Premium Bonus | Product Fee | Any Annual P-to-P Cap | Term |
|---|---|---|---|---|---|---|---|
| ATHENE IA - Athene Performance Elite® 15 Plus MVA ROP FEE | A+ | 73 | 10,000 | 27.00-29.00 | 0.95 | 7.00 | 15 yrs |
| NORTH AMERICAN COMPANY - Charter Plus 14 MVA High Band | A+ | 75 | 75,000 | 17.00-29.00 | 6.50 | 14 yrs | |
| NORTH AMERICAN COMPANY - Charter Plus 14 MVA Low Band | A+ | 75 | 20,000 | 13.00-25.00 | 6.50 | 14 yrs | |
| HEARTLAND NATIONAL - Secure Retirement 10 Max MVA | B++ | 80 | 5,000 | 10.00-25.00 | 6.00 | 10 yrs | |
| MIDLAND NATIONAL LIFE - IndexBuilder 14 OABR MVA High Band | A+ | 75 | 75,000 | 17.00-24.00 | 6.25 | 14 yrs | |
| AMERICAN LIFE - American Select 10 Bonus Plus MVA FEE | B++ | 85 | 20,000 | 20.00-23.00 | 0.80 | 6.00 (0.00),6.00 | 10 yrs |
| NORTH AMERICAN COMPANY - Charter Plus 10 MVA High Band | A+ | 79 | 75,000 | 14.00-23.00 | 6.00 | 10 yrs | |
| NORTH AMERICAN COMPANY - Charter Plus 10 (State Variations) High Band | A+ | 79 | 75,000 | 14.00-23.00 | 5.75 | 10 yrs | |
| MIDLAND NATIONAL LIFE - IndexBuilder 10 OABR MVA High Band | A+ | 79 | 75,000 | 16.00-23.00 | 6.00 | 10 yrs | |
| MIDLAND NATIONAL LIFE - IndexBuilder 10 State Variations OABR MVA High Band | A+ | 79 | 75,000 | 16.00-23.00 | 5.75 | 10 yrs | |
| AXONIC INSURANCE - Trailhead 10 PLUS Enhanced MVA FEE Low Band | A- | 89 | 20,000 | 23.00 | 0.95 | 6.50 | 10 yrs |
| AXONIC INSURANCE - Trailhead 10 PLUS Enhanced MVA FEE High Band | A- | 89 | 100,000 | 23.00 | 0.95 | 6.75 | 10 yrs |
| IBEXIS - WealthDefender Bonus Plus 10 MVA FEE Low Band | A- | 78 | 25,000 | 19.50-22.50 | 0.85 | 5.00 | 10 yrs |
| IBEXIS - WealthDefender Bonus Plus 10 MVA FEE High Band | A- | 78 | 100,000 | 19.50-22.50 | 0.85 | 6.00 | 10 yrs |
| ATHENE IA - Athene Performance Elite 10 Plus MVA ROP FEE | A+ | 78 | 10,000 | 18.00-22.00 | 0.95 | 5.50 | 10 yrs |
| ATHENE IA - Athene Performance Elite® 15 MVA | A+ | 73 | 10,000 | 20.00-22.00 | 7.00 | 15 yrs | |
| NORTH AMERICAN COMPANY - Charter Plus 10 CA High Band | A+ | 79 | 75,000 | 22.00 | 5.75 | 10 yrs | |
| NORTH AMERICAN COMPANY - Secure Horizon Plus MVA | A+ | 79 | 25,000 | 22.00 | 10 yrs | ||
| AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY - AssetShield Bonus 10 MVA | A | 80 | 5,000 | 14.00-21.00 | 5.50 | 10 yrs | |
| NASSAU LIFE AND ANNUITY COMPANY - Nassau Bonus Annuity Plus Group A MVA ROP FEE | B++ | 80 | 15,000 | 21.00 | 0.95 | 6.25 (0.00),6.25 | 10 yrs |
Back to Fixed Index Annuity Rates
Things to Consider When Buying Bonus Annuities
Available Indexes: The stock market indexes are available in the index annuity. We have a list of available stock market indexes available at each insurance carrier for simplicity.
Crediting methods (or limiting factors): Index annuity crediting methods are used to determine what interest rate is credited to your account annually. For example, cap rate, spread, or participation rate.
Insurer Rating: Financial Ratings are very important because they are an indicator of an insurance company’s ability to fulfill its obligations to its policyholders.
Investment Term: Terms range from 3 years to 10 years. During that period of time, you’ll receive a guaranteed rate but will have limited access to your funds. Usually, the longer the term the higher the yield but that isn’t the case in today’s rate environment.
Liquidity: You’ll notice a column for liquidity at our annuity marketplace; there will either be 10% or interest-only listed. This is the annual free withdrawal amount you can take from your annuity contract each year without a surrender penalty.
While a bonus annuity can be a great option in the right circumstances, there are also times when it is probably not the best solution. Bonus annuities typically have a longer surrender period than other fixed indexed annuities. For the most part, to get a bonus annuity, you must be willing to commit to at least a 7-year contract.
Another point worth noting is that the crediting component rates on bonus annuities are typically lower than those of an annuity without a bonus. For example, an index annuity without a bonus may have an annual cap of 5%, meaning your account is credited up to 5% annually based on the performance of the market index you’ve selected. A bonus annuity of the same quality and duration may be subject to a 4% cap.
So, in essence, you are getting extra interest upfront in exchange for earning potential in the future. This is generally not worth it if your primary objective is accumulation. However, if your objective is to use this portion of your retirement savings for guaranteed lifetime income, a bonus annuity may make sense.
Fixed Index Annuities have a reputation for being complicated, when in fact they are very simple compared to many other investment options. If you are considering a fixed index annuity, we suggest reading FINRA’s “The Complicated Risks and Rewards of Indexed Annuities.”
Bonus Annuities Pros and Cons
When shopping for a bonus annuity, it is important to weigh the pros and cons.
Bonus Annuity Pros
- Sometimes people find themselves in an investment product that no longer meets their risk tolerance, but there is a penalty to surrender the contract. When that is the case, bonus annuities can help offset the surrender charge and help you come out whole.
- If you are purchasing an annuity with an income rider and plan to take income in the first few years, a bonus can help boost your lifetime income payments.
Bonus Annuity Cons
- Bonus annuities usually have long surrender charges.
- The bonus usually has a vesting schedule, meaning if you get out of the annuity, some of your bonus will be recaptured.
- Bonus annuities usually have lower caps or interest rates, limiting your future income potential.
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