Surrender Charge

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Surrender Charge

1. A fee one must pay when canceling a life insurance policy. A surrender charge is levied to encourage a policyholder to remain with the same insurer.

2. A fee one must pay to a mutual fund for selling one's shares within a certain period of time. For example, one may be required to pay a surrender charge if one sells shares in the first year or two of ownership. The surrender charge exists to encourage stability in ownership of the mutual fund; that is, it discourages traders from speculating on the fund.

3. A penalty charge one owes if one makes a premature withdrawal from an annuity, insurance contract, or some other investment vehicles.
References in periodicals archive ?
50% Life No-lapse protection Not offered based on: Surrender Charges-- First year: Surrender Charges-- Surrender charges per Renewal years: unit values vary by gender and issue age ING Security Life of States unavailable AZ, CA, NY, PA Denver Insurance Min/Maximum issue age Company Minimum face amount $50,000 ($250,000, for (877) 886-5050 issue ages 86-90); www.
Known to the masses as the "10/10 Rule," this anti-competitive rule limits surrender charges on fixed and indexed annuities to no more than a 10-year period, and often to less than a 10 percent surrender penalty.
Surrender charges The surrender charge is a declining
During the accumulation period, surrender charges are waived for free withdrawal amounts (up to 10 percent of contract value or required minimum distribution, whichever is greater) for withdrawals in the window period and for contracts in one-year-rate duration.
Surrender charges were either levied as a percentage of the paid- up premium or as a percentage of the fund value.
Therefore, the IRS issued additional regulations in August 2005 clarifying that the entire cash value did not include a reduction for surrender charges and that the bargain element in a sale is treated as part of a distribution under Sec.
Withdrawals up to the annual maximum are free of surrender charges and any market-value adjustments.
Surrender charges lock a plan sponsor into a plan, regardless of plan performance or poor service.
But if he cancels and replaces the insurance policies now, he'll face stiff surrender charges and, as insurance companies scramble to make up in premiums what they once got in investment earnings, even higher premiums.