The bonus annuity has become very popular over the last few years with good reason. If you were offered a 10% bonus or even a 20% bonus to your principal you might take advantage as well. If you have $500,000 to invest a 20% bonus would pay $100,000 just for moving the money over. Is it worth it? For the right person it can be a phenomenal deal.
A bonus annuity pays a bonus. Usually, it is not a cash annuity bonus. In other words, you can’t just call the insurance company to withdrawal the money. A bonus annuity adds money to a separate figure than your available cash numbers. The separate figure has many names but let’s just call it account B. Account A performs like any other investment, money in with some kind of return and you can take income or your cash out when you need it. Account B performs a little different. This is the bonus part of the bonus annuity.
Account B is where the extra money is added, your other money is there too but the account works differently. It’s like having two accounts working at the same time and when you are ready you make a choice as to which one fits your needs better.
Account B usually has very strict rules which make sense considering, in the example above, the insurance company is giving you an annuity bonus of $100,000 on the initial $500,000. Think of it like an investment in you and an incentive to stay with the company. The annuity bonus is not immediately available. An insurance company could not hand out $100,000 bills and then just let you leave the next day. They would go out of business in a week. So they had to create rules to protect themselves and still be able to offer an amazing incentive.