Bonus interest is an additional, often temporary, interest-crediting feature in some fixed or indexed annuities and life insurance policies that rewards new deposits or specific contract behaviors. It may take the form of a higher teaser rate for an initial period, extra basis points added when premium thresholds are met, or loyalty bonuses for maintaining the contract beyond a set number of years. Bonus interest is distinct from premium bonuses but serves a similar marketing function: making illustrated early values look more attractive. Contracts with bonus interest may include offsetting features such as lower renewal rates to keep overall pricing sustainable for carriers.

Advisors encounter bonus interest in product comparisons, especially when shopping MYGAs or fixed accounts within indexed annuities. They scrutinize whether higher first-year rates are followed by competitive renewal rates or whether the product relies heavily on initial sizzle. Compliance teams urge advisors to base recommendations on multi-year projections instead of single-year interest spikes. Advisors explain to clients that bonus interest structures can change renewal dynamics and should not be the sole reason for choosing a product. Understanding bonus interest enables advisors to evaluate true long-term yield potential and avoid overemphasizing short-term credits that may not persist.