Surrender Fee

AAA

DEFINITION of 'Surrender Fee'

A charge levied against an investor for the early withdrawal of funds from an insurance or annuity contract, or for the cancellation of the agreement. Surrender fees act as an economic incentive for investors to maintain their contract, and they allow the insurance company to have reasonable expectations for the frequency of early withdrawals.

Also referred to as a "surrender charge".

INVESTOPEDIA EXPLAINS 'Surrender Fee'

Surrender fees vary among insurance companies and among annuity and insurance contracts, but a typical annuity surrender fee could be set as a 10% (of the funds contributed to the contract) charge levied for withdrawal in the first year. For each successive year of the contract, the surrender fee could drop by 1%, for example, effectively giving the annuitant the option of no-penalty withdrawal after 10 years in the contract.

RELATED TERMS
  1. Surrender Period

    The amount of time an investor must wait until he or she can ...
  2. Surrender Rights

    A right to cancel an annuity or life insurance contract in exchange ...
  3. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Annuity Contract

    The written agreement between an insurance company and a customer ...
  6. Annuity

    A financial product sold by financial institutions that is designed ...
Related Articles
  1. Home & Auto

    Make No-Load Annuities Your Viable Alternative

    These alternative retirement funds provide diversification with no fees, so what's the catch?
  2. Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of Annuities

    These may look like good retirement vehicles, but beware of the fees buried in the fine print.
  3. Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  4. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  5. Retirement

    Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.
  6. Retirement

    Why Financial Advisors Disagree

    Financial advisors sometimes offer conflicting opinions that can be confusing for many investors.
  7. Options & Futures

    Taking The Bite Out Of Annuity Losses

    If this investment product has caused you sleepless nights, it's time to consider alternatives.
  8. Retirement

    Are annuities for seniors only?

    Understand the benefits of investing in annuities at a younger age and how fixed or variable annuities might benefit the investor depending on risk tolerance.
  9. Retirement

    What is a longevity annuity?

    Understand all the characteristics of a longevity annuity contract, the purpose of a longevity annuity and what type of investor it appeals to.
  10. Insurance

    How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change in face value.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center