Bonuses on Indexed Life
One feature that has gained increasing attention on indexed life products over the past couple of years are bonuses or account value enhancements. There are two very important factors to consider when looking at an indexed life bonus:
- Is the bonus guaranteed, or non-guaranteed?
- What kind of bonus is it?
- Annuitization bonus
- Persistency bonus
Most bonuses are not guaranteed, but many are illustrated in the policy values of the illustration. This is an important feature to explain to the policyowner, as the insurance carrier may or may not pay the bonus when it comes time to credit it. In addition, many policies offer an annuitization bonus which offers an escalated bonus amount (i.e. 10% bonus) in the event that the death benefit is annuitized for a minimum 10-year period certain, for example. Most persistency bonuses begin after year ten and range up to 1.00% on a guaranteed basis and 1.25% on a non-guaranteed basis.
