Annuity bonus credit is an upfront percentage credit applied to an annuityTMs premium or account value at issue, designed to enhance initial contract value or offset surrender charges from prior products. Bonus credits are common in fixed indexed and variable annuities and may range from a small percentage to double-digit incentives. While they can make a product appear more attractive, bonuses are typically offset by longer surrender periods, lower ongoing crediting rates, higher rider fees, or tighter caps and spreads. Bonus structures may apply differently to income bases versus accumulation values and can be subject to vesting schedules or recapture provisions if the contract is surrendered or exchanged early.

Advisors evaluate annuity bonus credits when comparing products for clients who are considering 1035 exchanges or large premium contributions. They model how bonuses affect long-term performance, not just day-one value, and explain any tradeoffs in caps, spreads, or surrender schedules. Compliance and suitability reviews scrutinize bonus usage in replacement cases to ensure that clients are not being enticed into products that are worse over time in exchange for an upfront bump. Advisors also clarify distinctions between bonuses that only enhance income bases and those that increase true account value. Understanding annuity bonus credits helps advisors present transparent, balanced comparisons and avoid allowing headline bonus numbers to overshadow more important long-term contract mechanics.