Some deferred annuity products offer consumers bonus interest options as sales incentives. That is, guaranteed interest payments five to ten percent above the credited rate for contract owners agreeing to annuitize their deferred annuities for the same number of years as the bonus percentage (for five years, if the first-year bonus is five percent, or for six years if the bonus is six percent). In addition, owners must agree to keep the deferred annuity for one year before it may be annuitized.
Insurance companies can afford to offer benefit guarantees and bonus options if they know in advance how long money will be kept in each contract, which means companies can match their assets with their future liabilities.
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