What does the term "reversionary bonus" indicate in life insurance policies?

The term "reversionary bonus" in life insurance policies primarily indicates that it is a bonus that adds to the sum assured over time. This type of bonus is typically declared as a percentage of the sum assured and is credited to the policy annually but only becomes payable when the policy matures or in the event of the policyholder's death. As such, it increases the total benefit that the policyholder or their beneficiaries will receive.

In contrast, the other options do not accurately describe the nature of reversionary bonuses. For instance, while it is true that a bonus could be paid on termination, the specific characteristic of a reversionary bonus is its accumulation over time rather than being contingent solely on policy termination. Similarly, reversionary bonuses are not simply the current value of the policy, which reflects the total accumulated cash surrender value rather than just bonuses accrued. Lastly, these bonuses are not fixed amounts given annually, as they can fluctuate based on the insurer's profitability and other factors. Thus, understanding that a reversionary bonus specifically increases the sum assured illustrates its purpose as a long-term enhancement to the policy's payout.