Surrender Rights

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. Free Look Period

    A period where a new insurance policy owner is able to terminate ...
Related Articles
  1. Personal Finance

    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
  2. 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.
  3. 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.
  4. Markets

    Update Your Variable Annuity With Section 1035

    Thanks to a special tax code clause, you can surrender a variable annuity without paying income tax.
  5. Financial Advisor

    Here's How to Duck a FINRA Slap on L Shares

    Regular and L-share annuity contracts come with back-end surrender charges that clients should know. Here's how to steer clear of any compliance trouble.
  6. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
  7. Personal Finance

    Cashing in Your Life Insurance Policy

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

    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.
  10. Financial Advisor

    An Annuity Lowdown for Investors and Advisors

    Knowing how annuities work starts with an explanation of what each part is. Here is a list of terms that cover the basic aspects of annuities.
RELATED FAQS
  1. If I surrender this life insurance policy and take the $40,000, are there any tax ...

    I have a flex life policy for $100,000 that has a cash value or surrender value of $40,000. ... Read Answer >>
  2. What is the best method to cash in my life insurance?

    I am 70 and I’m collecting $1,500 a month from Social Security. I have a 75K paid up life insurance and would like ... Read Answer >>
  3. What is a tax-free 1035 Exchange?

  4. Would I owe taxes on a 1035 exchange?

    I have an old paid-up life policy with a substantial outstanding loan. If I surrender the policy, the ... Read Answer >>
  5. Should I invest my inherited IRA in a variable annuity?

    I inherited my husbands IRA worth $232,000. Should I invest it in a variable annuity that will charge me 1.65% per year. ... Read Answer >>
  6. Should I invest in a hybrid fixed indexed annuity?

    I am thinking about putting my life savings into an annuity that is supposed to pay me an 8% signing bonus and 7% compounded ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center