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Are Bonus annuity insurance products with premium bonuses really cost-effective? |Mr. American Pension Column Vol.04

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In order to solicit business, we often see banks launching "deposit and give away" activities from time to time. For example, open an account and deposit a sum of money, and then give away gold bulls, gold necklaces, gold coins, or as long as the depositor guarantees not to withdraw it for 3 months, just give it directly. A savings bonus can range from 200 yuan to several thousand yuan.

Similarly, in the fierce market competition,Annuity Insurance CompanyWill often launch and give away"Premium Reward"Annuity products to promote the sales of annuity insurance.For example, a life insurance company will give 5% of the first year's premium, 8% as a bonus, or a one-time Catch Up 10-15% bonus after how many years of deposit.

Is this type of Bonus annuity insurance product offering premium bonuses really cost-effective?What is its biggest disadvantage?American Life Insurance Guide Community ©️Mr. Annuity Series Column, Will be briefly interpreted in this article.

1. What is the annuity product that provides premium incentives?

Quite a few in the marketSecurity Annuity Products,orIndex Annuity Products, To provide policyholders with a large amount of "cash" interest-bearing reward, usually for the first year of premium deposit,This type of annuity product is called Bonus Annuity.

Specifically, if an insured person invested $10,000 and applied to purchase an annuity insurance product with a "5% premium bonus", the insurance company would give an additional $500 to the annuity product account. , The fund of $10,500 is reflected in the annuity account.

At present, some annuity insurance products on the US market provide premium incentives ranging from 2% to 15%.

saving bank bonus(Bonus: The insurance company provides a bonus for the premium amount deposited by the insured)

2. Is the premium-rewarded annuity insurance product good?

There is no standard answer to whether such promotional annuity insurance products are good or not.However, in order to make up for this part of the annuity premium rewards provided to policyholders or investors, insurance companies usually share this bonus Bonus evenly among the following cost items.

These cost items include:

  • Mortality cost
  • Risk expense cost
  • Surrender penalty cost

And another more common practice is to have a longerSurrender penalty period.

Premium bonus annuity products usually have a longer surrender penalty period

If an annuity product offers a "bonus" promotion, in most cases, it means that this annuity product usually has a higher surrender penalty or a longer surrender penalty period.

Let us first look at the following table for specific instructions.

Assuming that Mr. Zhang spends $10 to choose an annuity product, the surrender penalty period for this annuity product is 7 years, and the surrender penalty fee is as follows:

Surrender period Fine ratio
Penalty for surrender in the first year 10%
Penalty for surrender in the first year 9%
Penalty for surrender in the first year 8%
Penalty for surrender in the first year 7%
Penalty for surrender in the first year 6%
Penalty for surrender in the first year 5%
Penalty for surrender in the 7th year+ No penalty

Mr. Zhang decided to surrender the insurance after the fourth year. At this time, the annuity account is worth $4, and the penalty for the fourth year is 15%.Then Mr. Zhang needs to pay a surrender penalty of $10,500 from the insurance company.

By increasing the percentage of surrender fines each year, insurance companies can use "premium bonuses" to promote sales to attract investors, and then spread the cost of premium bonuses evenly on the surrender fines.As shown below.

Surrender period Increase the percentage of fines
Penalty for surrender in the first year 15%
Penalty for surrender in the first year 14%
Penalty for surrender in the first year 12%
Penalty for surrender in the first year 10%
Penalty for surrender in the first year 8%
Penalty for surrender in the first year 7%
Penalty for surrender in the 7th year+ No penalty

Similarly, Mr. Zhang bought an annuity product with a 5% premium reward and decided to surrender the insurance after the fourth year. At this time, the value of the annuity account is also $4, and the penalty for the fourth year becomes 15%.Then Mr. Zhang needs to pay a surrender penalty of $15,000 from the insurance company.

American Annuity Insurance Mr. Annuity Column Mr Annuity
*The annuity interest rate and Cap Rate will change in real time under the influence of the market. The content of this picture is not a guarantee of interest rate.The specific interest rate of annuity insurance products is subject to the latest value released by the insurance company.

However, the above method is not conducive to market competition-the policyholder may give up choosing products with a high surrender penalty period for liquidity after making a comparison.Therefore, in order to make up for the cost of premium incentives, it is more common for insurance companies to doExtend the surrender penalty period.As shown in the table below.

Surrender period Increase the percentage of fines
Penalty for surrender in the first year 10%
Penalty for surrender in the first year 9%
Penalty for surrender in the first year 8%
Penalty for surrender in the first year 7%
Penalty for surrender in the first year 6%
Penalty for surrender in the first year 5%
Penalty for surrender in the first year 4%
Penalty for surrender in the 8th year+ 3%
Penalty for surrender in the 9th year+ 2%
Penalty for surrender in the 10th year+ No penalty

It’s Mr. Zhang who bought an annuity with a 5% premium and decided to surrender the insurance after the fourth year. At this time, the value of the annuity account is still $4, and the penalty for the fourth year is 15%.Then Mr. Zhang needs to pay a surrender fine of 10,500 from the insurance company.

This seems to be the same as the surrender penalty situation of the first annuity insurance without premium incentives, but Mr. Zhang still needs the $500 bonus for this “free” bonus.Face surrender fines from the 7th to the 10th year, And the fine is much greater than $500.

Therefore, from the perspective of policyholders and investors, you can chooseThe fine period is relatively short, and the proportion of fines is relatively lowThe long-term benefits of the annuity products of the company may far outweigh the effect of premium incentives.

There are exceptions to everything. Just like the credit card sign-up bonus, the premium bonus of some annuity insurance products may also have historical high promotions at certain times. At this time, it is rare to get a handful of wool and reduce the cost of insurance. Good time.

white sheep under blue sky during daytime(Mr. Annuity: You can meet the wool situation, but you can't ask for it)

Article summary

"The wool is on the sheep", Whether it is to send premium bonuses or other Bonus, the final cost will fall on the products purchased by the insured.Such annuity products with premium bonuses are generally not considered to be suitable investment and financial products for the elderly or retired people.

Applying for and purchasing annuity insurance is not as unpredictable as building a rocket. Every life insurance company must provide detailed product descriptions for each product, or "prospectus", for investors to consult in accordance with laws and regulations.

Both the policyholder and the investor can be professionalInsurance Broker ConsultantWith the assistance of, use popular language and logic to understand the characteristics of different annuity products, and compare and analyze each oneAnnuity insuranceThe advantages and disadvantages of the product and the applicable principles, combined with the household asset liquidity structure, judge and identify its own investment expectations, and finally make a judgment that is in line with its own long-term interests. (End of full text)

(>>>Recommended reading:Comparison|Index annuity and fund annuity, which annuity insurance is better? (Version 2022)

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