DEFINITION of 'Surrender Rights'

A right to cancel an annuity or life insurance contract in exchange for its cash value. Surrendering such a contract early can incur surrender charges (fees charged by the company upon cancellation) as well as income tax liability. Before exercising a contract's surrender rights, contract holders should determine the contract's cash value, what fees and taxes will be incurred upon surrender, and how much cash they will ultimately net from canceling the contract.

BREAKING DOWN 'Surrender Rights'

In the case of life insurance, getting a life settlement in exchange for the life insurance contract may be a more lucrative option than surrendering the policy. Contract holders should also keep in mind that if they choose to repurchase a similar contract later on, the new contract may be more expensive. Not all annuities and life insurance policies have surrender rights.

RELATED TERMS
  1. Surrender Fee

    A charge levied against an investor for the early withdrawal ...
  2. Surrender Period

    The amount of time an investor must wait until he or she can ...
  3. Surrender Charge

    A fee levied on a life insurance policyholder upon cancellation ...
  4. Cash Surrender Value

    The sum of money an insurance company will pay to the policyholder ...
  5. Traditional Whole Life Policy

    A type of life insurance contract that provides for insurance ...
  6. Debt Cancellation Contract

    A contract in which a bank agrees to cancel all or part of a ...
Related Articles
  1. Financial Advisor

    Cash Value vs. Surrender Value: What Is the Difference?

    How much you actually receive from the cash value of your life insurance policy is based on the surrender value, which can sometimes be much lower.
  2. Insurance

    Understanding Cash Surrender Value

    The amount of money an insurance company pays the owner of an insurance policy if the policy is voluntarily surrendered prior to the event that is insured
  3. Financial Advisor

    How to Avoid Overpriced Annuities

    The key to not paying excessive fees for annuities is understanding how they work. Here's what you need to know.
  4. Financial Advisor

    Divorce and Annuities: What Clients Need to Know

    Divorce can be the most financially devastating event in a person’s life. Here’s what your clients need to know about handling annuities in a divorce case.
  5. Retirement

    Update Your Variable Annuity With Section 1035

    Thanks to a special tax code clause, you can surrender a variable annuity without paying income tax.
  6. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  7. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
  8. Financial Advisor

    Build Your Own Annuity

    Here are some tips on the different types of annuities to have in your portfolio.
  9. Financial Advisor

    Annuities and Baby Boomers: The Pros and Cons

    The pros and cons of annuities that Baby Boomers seeking retirement income need to know.
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  6. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
Trading Center