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. Free Look Period

    A period where a new insurance policy owner is able to terminate ...
  5. L Share Annuity Class

    The L share annuity class is a common share class offered by ...
  6. Fixed Annuity

    An insurance contract in which the insurance company makes fixed ...
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. 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. Retirement

    Converting An IRA Annuity To A Roth: Know The Rules

    We look at the past and current legislation that governs IRA annuity conversions.
  4. Insurance

    Cashing in Your Life Insurance Policy

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

    The Disadvantages of Annuity Contracts

    The disadvantages of annuities aren't always fully understood.
  6. Insurance

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  7. Investing

    Just Say No to Variable Annuities

    Sellers of variable annuities make them sound great to earn their commission, but they are not.
  8. Retirement

    When Annuities Are the Wrong Investment

    Understand how annuities provide several unique benefits, but many drawbacks as well, and identify the situations where they are not the best investment.
  9. Financial Advisor

    Build Your Own Annuity

    Here are some tips on the different types of annuities to have in your portfolio.
  10. 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. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  6. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
Trading Center