What are Bonus Annuities?

Yes, there are bonuses in the annuity business. Bonuses are provided by insurance companies offering annuities on annuities that have surrender charges. These bonuses can help make your annuity investment grow even faster, especially adding to the earnings it already accumulates. These bonuses can be around 3% to 5%. The bonus, as small as it may seem, brings a lot of benefits to the investor. These bonuses are also immediately given to you.

The benefits of bonus annuities are these: it adds to your investment and it also lengthens the surrender period of your annuity. The common practice in annuities is that the surrender period is seven years, but with a bonus annuity, this can be extended and become around eight or nine years.

Bonus annuities, living up to its name of being bonuses, allow withdrawal unlike the ordinary annuity contract. Withdrawals can be made of up to around 15% maximum of your premiums. This is already a yearly limit, and if you withdraw within that range, you will not need to pay any penalty. If you, however, choose to withdraw from the earnings of your contract when you are still younger than 59 ½, you will need to pay the usual 10% surcharge. However, since you cannot have all the benefits, any withdrawals made from bonus annuities will be taxed.

If you want to invest into a bonus annuity, you should also know the downsides of one. Bonus annuities are often offered for more expensive premium payments. It has often been accused of being simply deceitful in that the life insurance companies still recover the bonuses they give away in the long run, in the form of premiums. Thus, it is important to know exactly what you are paying for when you plan to get a bonus annuity contract. A lot of people then just believe that bonus annuities are just one way of insurance companies to attract more investors. For these reasons, most people still recommend the traditional forms of annuities. The only way to know whether a bonus annuity is indeed good for you is to consider your unique and individual case.

Bonus annuities are good investment options that you may want to consider, but careful consideration is key. In addition, you will notice that this may not be readily available to you because most insurance agents don't offer this outright unless you inquire about it. The reason behind this is that they get lower commissions from bonus annuities. Thus, now that you know what bonus annuity is and what its benefits are, you should remember to ask your insurance agent if they offer it so you can take advantage of the benefits of bonus annuities. Also, be careful of the rates that will be charged to you, because life insurance companies sometimes charge higher rates to recover the bonuses they will give you in the long run. Thus, make sure that you spend enough time shopping around and comparing different bonus annuity offers to make sure that you are getting the real bonus price.