Bonus annuity credit is the actual dollar amount added to an annuity contract as a result of a stated bonus percentage applied to eligible premiums. For example, a 10 percent bonus on a $100,000 premium creates a $10,000 bonus credit. Depending on contract design, this credit may be added to the account value, income base, or both and may be subject to vesting, recapture, or different growth rules. While bonus credits increase initial values on paper, they often come with tradeoffs in the form of longer surrender schedules, lower cap rates, or higher rider charges designed to recover the insurerTMs cost of the bonus over time.

Advisors highlight bonus annuity credits when illustrating contract values at issue, but they also walk clients through the fine print about how and when those credits are fully available. They compare scenarios with and without bonuses to show net effects after fees, caps, and surrender charges. When using bonuses to help offset surrender losses on existing annuities, advisors document why the replacement is still in the clientTMs best interest beyond the bonus alone. Compliance teams pay particular attention to how bonus credits are explained in marketing materials and client conversations. Understanding bonus annuity credits allows advisors to present them as one component of value rather than the sole reason to choose a product.