They sound great, but are they?
The bonus is usually vested meaning you only get a percentage credited each year for the 10-year surrender. See the example below.
If you surrender the annuity before the end of the term, you will have a regular surrender charge on the non-vested portion of the bonus. Some companies will show the full bonus in the accumulation but at surrender, you only get the vested portion. At death, some companies will include the full bonus and some will only include the vested portion. You get lower caps participation rates and higher spreads with a bonus. The compensation on a bonus annuity is also less with some companies. Bonus annuities can be a great option for your client, but make sure you know the facts about what you are offering.
—Sharon McCauley, Annuity Specialist, Wealth Watch Partners