# What is a reversionary bonus?

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The following is an extract from the DHW textbook:

"Exercise 6.8

Consider an annual premium with-profit whole life insurance
issued to a select life aged exactly 40. The basic sum insured is $200 000 payable at the end of the month of death, and the premium term is 25 years. Assume a compound reversionary bonus of 1.5% per year, vesting on each policy anniversary, initial expenses of 60% of the annual premium, renewal expenses of 2.5% of all premiums after the first, plus per policy expenses (incurred when a premium is payable) of$5 at the beginning of the first year,
increasing by 6% per year compound at the beginning of each subsequent year.

Please could someone explain what a compound reversionary bonus is and how it will be treated in this question.

 year (t) sum assured in year (t) bonus at end of year (t) 1 $$200000$$ $$200000 \times 1.5\% = 3000$$ 2 $$203000$$ $$203000 \times 1.5\% = 3045$$ ... ... ... 10 $$228678$$ $$228678 \times 1.5\% = 3430$$
In other words, the sum assured in year t = $$200000 \times (1.015)^{t-1}$$