Surrender Charges is defined as charges that are deducted if a life insurance policy or annuity is cashed in (surrendered). These charges also are deducted if the policyholder borrows money on the policy or if the policy lapses for non-payment.
Surrender Charges Explained
A type of sales charge that applies if you withdraw money from a variable annuity within a certain period of time, usually six to ten years. This is known as the surrender period. The charge declines over time until it no longer applies. For example, a 7% surrender charge might apply in the first year after purchase. The charge may fall to 6% in the second year, 5% in the third year and so on, until the eighth year, when it no longer applies.