What Is the Most Common Bonus in a Bonus Annuity?

What is the most common bonus in a bonus annuity?

Usually, it is an upfront premium bonus.

But let’s make something very clear.

That bonus is not free money.

There is no philanthropist sitting at an annuity company giving away extra dollars because they love America.

There are 100 pennies in a dollar.

Not 100 pennies plus bonus pennies.

Key Takeaways

• The most common bonus in a bonus annuity is usually an upfront premium bonus
• Bonus annuities are most commonly tied to Fixed Index Annuities
• Annuity bonuses are not free money
• The bonus is part of the overall contract design
• Higher bonuses do not automatically mean better guarantees
• Focus on the contractual income number, not the bonus percentage

What Is a Bonus Annuity?

A bonus annuity is usually an annuity that offers an upfront bonus percentage when you purchase the contract.

Most of the time, these bonuses are attached to Fixed Index Annuities.

That does not automatically make the product good or bad.

But it does mean you need to understand what the bonus actually does.

The Bonus Is Not the Product

The biggest mistake people make is focusing on the bonus instead of the guarantee.

A bonus is just one moving part inside the contract.

It does not tell you:

• what the income guarantee will be
• what the surrender charges are
• how the product works long term
• whether the annuity is actually suitable
• whether another carrier offers a better contractual guarantee

The bonus is not the product.

The contract is the product.

Why Bonuses Get So Much Attention

Bonuses get attention because they are easy to sell.

A 20%, 30%, or 40% bonus sounds exciting.

But that is exactly why you need to slow down.

If the pitch starts with the bonus, ask:

What is the contractual guarantee?

That is the number that matters.

Bonus Annuities and Income Riders

Sometimes bonus annuities are used with Income Riders.

Income Riders are designed to create future lifetime income.

In that case, the real question is not:

“How big is the bonus?”

The real question is:

What is the guaranteed lifetime income number?

If a product with a lower bonus provides a higher guaranteed income payout, then the bonus did not help you.

Do Not Chase the Highest Bonus

Chasing the highest bonus is one of the easiest ways to make a bad annuity decision.

A high bonus can distract you from:

• lower future guarantees
• longer surrender periods
• weaker income payouts
• complicated contract rules
• poor overall value

The highest bonus does not mean the best annuity.

The Number Matters More Than the Bonus

When comparing annuities, focus on the contractual number.

For lifetime income, that means the guaranteed income amount.

For Principal Protection, that means the guaranteed interest rate.

For legacy or long-term care, that means the actual contractual benefit.

Not the shiny bonus.

The number.

If It Sounds Too Good to Be True

If someone says the annuity company is giving you a huge bonus for free, be careful.

Insurance companies are for-profit businesses.

They build the bonus into the overall contract.

Nothing is free.

Everything is priced.

Ask the Two Questions

Before looking at any bonus annuity, ask:

What do I want the money to contractually do?

When do I want those contractual guarantees to start?

Those two answers determine whether the annuity fits.

Not the bonus.

Where to Compare Real Guarantees

If you want to compare annuity guarantees without getting distracted by bonus sales pitches, you can use our annuity calculators here:

https://www.stantheannuityman.com/annuity-calculator/

The Bottom Line

The most common bonus in a bonus annuity is usually an upfront premium bonus.

But that bonus is not free money.

It is part of the overall contract.

Do not buy an annuity because of the bonus.

Buy it for what it will contractually do.

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