reversionary bonus

A bonus added to the sum assured (or basic sum assured) of a with profits life assurance policy out of a life company's surplus profits usually on an annual basis. These bonuses are payable at the end of the term of the policy (that is, at maturity), or on prior death of the life assured. Once allocated, their values are guaranteed provided premiums are paid up to maturity or death.

The values of such bonuses are usually related to the sum assured and can be either simple reversionary bonuses (related to the sum assured only) or compound reversionary bonuses (related to the sum assured plus bonuses to date). Reversionary bonuses may sometimes be taken in cash at the time they are declared but the values will be significantly lower compared with leaving them until maturity.