Glossary

Bonus annuity

An annuity that adds an extra percentage to the premium or the first-year rate, usually offset by longer surrender periods, vesting rules or lower caps.

Also called: premium bonus annuity, bonus rate annuity

A bonus annuity is a fixed, indexed or variable annuity that credits something extra at the start. A premium bonus adds a percentage of your deposit to the account value right away; an interest-rate bonus pays a higher rate for the first year only. Some income riders also advertise a bonus, but it applies only to the rider's benefit base, not to cash you can withdraw.

Hypothetical example: you deposit $100,000 into an indexed annuity with a 10% premium bonus, so the account shows $110,000 on day one. The contract carries a 12-year surrender schedule and lower caps than a similar product without a bonus. If you surrender in year four, the insurer applies its surrender charge and may take back any bonus that has not yet vested, so you could walk away with less than you put in.

The insurer pays for the bonus somewhere: through longer or steeper surrender charges, lower crediting rates or caps, higher fees or a vesting schedule. A bonus can still be worthwhile for money that will stay put for the full surrender period, but compare the contract's projected value over time against a no-bonus alternative rather than the headline number. See annuity surrender charges and free withdrawals and annuity sales abuses targeting seniors.

Last reviewed October 4, 2026

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Related terms

Surrender period The years after purchase during which cancelling or over-withdrawing from an annuity or permanent policy triggers a surrender charge. Surrender charge A fee deducted from a policy's or annuity's value if you cancel or withdraw too much in its early years, usually shrinking each year. Indexed annuity A fixed annuity whose interest is tied to a market index's gains, limited by caps or participation rates, with a floor that shields it from index losses. Fixed annuity An annuity that credits a rate set by the insurer, with principal protected from market losses, either deferring growth or paying fixed income. Cap rate The maximum rate an indexed universal life policy or indexed annuity will credit for a period, no matter how much the linked index rises. Free withdrawal provision An annuity clause that lets you take out a set share of the contract value each year, often 10%, without paying a surrender charge.

Related guides

Annuity surrender charges and free withdrawals How annuity surrender charges work, the free-withdrawal allowance, market value adjustments, waivers, and what it costs to leave a contract early. Fixed indexed annuities: caps, participation rates and trade-offs A fixed indexed annuity credits interest tied to an index with a zero floor. How caps, participation rates and spreads work, the real costs, and who it suits. Life insurance class actions: documented cases and what they paid Documented life insurance and annuity class actions with sources and outcomes, plus how to handle a settlement notice, opt out, or check that one is real.

Related annuity companies

Allianz Life Minneapolis-based U.S. arm of Germany's Allianz SE, a long-time leader in fixed index annuities that also sells registered index-linked annuities. American Equity and American National Brookfield Wealth Solutions' annuity group: American Equity and Eagle Life fixed index annuities and American National MYGAs, sold through agents and online. Delaware Life Indiana-based Group 1001 insurer selling fixed indexed annuities and MYGAs through agents; ratings went to negative outlook in 2026 over affiliated investments. EquiTrust Life Chicago-based fixed and fixed indexed annuity specialist sold through independent agents; owned since 2025 by Amistad Financial Group. AM Best rates it B++. Sammons Financial (Midland National and North American) Employee-owned group whose Midland National and North American units sell fixed index annuities, MYGAs and RILAs through agents, banks and advisers. Security Benefit Topeka annuity specialist owned by Todd Boehly's Eldridge, known for fixed indexed annuities, MYGAs and K-12 403(b) plans; not sold in New York.