Surrender Fee

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".

BREAKING DOWN '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. Surrender Charge

    A fee levied on a life insurance policyholder upon cancellation ...
  4. No-Load Annuity

    A type of variable annuity that charges much lower fees and expenses ...
  5. Mortality And Expense Risk Charge

    A variable annuity fee included in certain annuity or insurance ...
  6. Annuity

    A financial product that pays out a fixed stream of payments ...
Related Articles
  1. Professionals

    Variable Annuity Charges

    FINRA Series 6: Section 11 Variable Annuity Charges. This section is about charges on Variable annuity: surrender charge, mortality and expense risk charge, administrative fees, fund expenses ...
  2. Professionals

    Annuity Distributions and Variable Annuity Charges

    FINRA/NASAA Series 26 Section 3 - Annuity Distributions and Variable Annuity Charges. This section deals with taxation on annuity earnings, variable annuity charges (surrender charge, mortality ...
  3. Products and Investments

    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. Professionals

    Purchasing Variable Annuities

    Purchasing Variable Annuities
  5. 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
  6. Retirement

    Introduction To Annuities: Advantages And Disadvantages

    In the last section, we explored the phases of annuities and how contributions are made to them and distributions made from them. This section covers the advantages and disadvantages of annuities ...
  7. Products and Investments

    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.
  8. Options & Futures

    Update Your Variable Annuity With Section 1035

    Thanks to a special tax code clause, you can surrender a variable annuity without paying income tax.
  9. 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.
  10. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
RELATED FAQS
  1. What can I do if I bought an annuity and don't want it anymore?

    Consider possible repercussions of cashing in your annuity policy. Depending on the circumstances, this could cost you. There ... Read Answer >>
  2. Are there penalties for withdrawing monies invested in annuities?

    Learn about the penalties associated with taking early withdrawals from an annuity. Steep penalties are assessed by the insurer ... Read Answer >>
  3. Can I borrow from my annuity to put a down payment on a house?

    Learn how you can borrow money from an annuity for a house down payment, but also understand why fees and penalties make ... Read Answer >>
  4. How do I get out of my annuity and transfer to a new one?

    Find out how to transfer your investment from one annuity to another, including what factors to consider before making the ... Read Answer >>
  5. What is a tax-free 1035 Exchange?

    A Section 1035 Exchange refers to the replacement of an annuity or life insurance policy for a new one without incurring ... Read Answer >>
  6. My variable annuity account took a beating. Should I seek other alternatives?

    This depends on several factors, you should ask yourself, the insurance company, or your adviser the following questions ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. 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 ...
Trading Center