Surrender Charge

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DEFINITION of 'Surrender Charge'

A fee levied on a life insurance policyholder upon cancellation of his or her life insurance policy. The fee is used to cover the costs of keeping the insurance policy on the insurance provider's books.

Also known as a "surrender fee".

INVESTOPEDIA EXPLAINS 'Surrender Charge'

If the insured party informs the insurer in advance of the cancellation of his or her policy, and then continues to pay for a period of time before the actual cancellation, the surrender charge is usually waived.

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