Annual bonus declared on participating policies. Once declared, it forms part of the guaranteed cash value of the policy.
A reversionary bonus is an annual bonus declared by an insurer on a participating policy. Once declared, it forms part of the guaranteed cash value of the policy — the insurer cannot claw it back.
Reversionary bonuses are how participating policyholders capture a share of the participating fund's investment performance over time.
Each year, the insurer's actuary determines a bonus rate based on participating fund returns, mortality experience, and expenses.
The bonus is expressed as a percentage of sum assured or as additional units. Common rates: 1.5% – 3% of sum assured per year, in stable market periods.
Once declared, the bonus is added to the policy's guaranteed value. From that point, it earns its own bonuses (a compounding effect).
Worked example: S$100,000 sum assured + 5 years of 2% reversionary bonuses ≈ S$10,400 added in guaranteed value, claimed in addition to the original sum assured.
Reversionary: declared annually, locked in once declared.
Terminal: declared only on the policy claim event (maturity, death, or surrender). Not guaranteed and can be significantly larger than annual reversionary bonuses in a strong fund year.
Terminal bonuses are the insurer's 'reserve buffer' — they can adjust them to absorb market shocks without disrupting annual reversionary declarations.
Surrendering early often means a much smaller terminal bonus (or none), which is one reason early surrender of participating policies is so expensive.
Reversionary bonuses can be reduced in subsequent years — though once a year's bonus is declared, that specific bonus is locked.
2018 – 2023 saw several Singapore insurers reduce bonus rates as fund returns disappointed. Bonus illustration projections from policies sold in the early 2010s have generally not been met.
Always read the latest par fund update from your insurer to gauge whether your projected bonuses still look realistic.
An annual bonus declared by the insurer on a participating policy. Once declared, the bonus locks in as part of the guaranteed policy value — the insurer cannot claw it back.
Determined annually by the insurer's actuary based on participating fund returns, mortality experience, and expenses. Typically expressed as a percentage of sum assured or as additional units. Common rates: 1.5% – 3% per year of sum assured in stable markets.
Future bonuses, yes — insurers can declare lower or zero bonuses in subsequent years if fund performance falters. Past declared bonuses are locked in. The 2018 – 2023 environment saw widespread reversionary bonus reductions across SG insurers.
Insurers publish annual 'par fund updates' showing bonus rates declared, fund performance, and projections. Compare your insurer's last 5 – 10 years of declared bonuses against the original Benefit Illustration projections — significant under-performance is a warning sign.