Surrender fee

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.

Surrender fee.

A surrender fee is the penalty you owe if you withdraw money from an annuity or mutual fund within a certain time period after purchase. The period is set by the seller.

In the case of a mutual fund, it's designed to prevent in-and-out trading in a fund, which might require the fund manager to liquidate holdings in order to redeem your shares.

In the case of an annuities contract, there's the additional motive of covering the sales charge paid to the investment professional who sold you the product.

References in periodicals archive ?
Because the analyzed product has no surrender fee, (13) a strong influence from the chosen target level on surrender behavior is not to be expected.
In addition, most FIAs have unusually long surrender fee periods.
You can even surrender before 15 years if you need money for treatment of critical illnesses of self or spouse by paying a two per cent surrender fee.
Not surprisingly, when the markets crashed soon after and the Hagmans paid a large surrender fee on their life insurance, their total losses were huge.
If a cat has an unwanted litter, Greenhill will take the litter for adoption for a small surrender fee.
178) In Pennsylvania, maternity homes persisted in the despised practice of accepting babies upon payment of a surrender fee of $50-100.
Once you've set up the plan, you may have to pay a surrender fee to get out of it.
The lock-in, after which no surrender fee is levied, is five years.
Clients should be aware that many of these products have a surrender charge period that can last upwards of 10 years--though the surrender fee will decrease during each year of the surrender charge period.
In addition, it has no annual maintenance fees, no initial sales charges, and a low 2 percent surrender fee should an investor need to sell his or her contract or take excessive withdrawals during the first five years of ownership.
Senior investors, in particular, should beware of the high surrender fees and steep sales commissions agents often earn when they move investors into variable annuities.
What Fisher likes about annuities is his annuity conversion program, which buys folks out of their annuity surrender fees if they become long-term clients.