Most of the insurance policies provide various choice to receive the declared bonus. Usually the major ways to receive the bonus are
1. Adjust with payable premium.
Declared bonus can be adjusted with premium payable. For example, if the premium is 10000 and bonus available is 4000, the customer shall pay only 6000 to the company.
2. Cash out
Bonus can be received in hand after declaration.The proceeds will be credited in bank account or paid by cheque.
3. Receive on Maturity
It is good to receive the compound reversionary bonus on maturity because it will grow if it is untouched. It can be received as lump sum on maturity.
The customer can make the choice while taking the policy and some companies let them to change in future also. Read the offer document to know about the option your policy provides.
My suggestion is to go for third option, receive it on maturity.