Surrender Charge

What Does Surrender Charge Mean?

A surrender charge is a fee imposed when a policyholder cancels their life insurance policy or withdraws funds from the savings component before it matures. For withdrawals, this fee typically decreases over time.

The surrender charge is also known as a surrender fee.

Insuranceopedia Explains Surrender Charge

The surrender charge amount depends on when the policyholder terminates their insurance contract. The insurer may impose a lower fee if the policy has been held for a longer period. This charge exists to discourage policyholders from canceling their policy and reallocating their funds elsewhere. However, in some cases, the surrender charge may be waived. For instance, a waiver may apply if a policyholder notifies the insurance company of their intent to cancel at a later date and continues to pay premiums until that time.