What is a surrender charge?
A surrender charge is a fee which is charged when someone cancels or cashes out an annuity before it matures. Ostensibly, surrender charges are designed to compensate the institution which administers the annuity for the cost of managing and maintaining the annuity; under normal circumstances, the routine fees associated with the annuity cover these costs, but when the annuity is canceled early, these costs have not yet been recouped. Information about surrender charges is included in the contract signed when the annuity is purchased, and it is a very good idea to read through such contracts closely. Annuities are designed to provide people with set, predictable income. They are usually structured in a way which makes them tax-free, and intended for people to use for income during retirement. Annuities can be purchased through life insurance companies and other types of financial institutions, and they are viewed as a long term investment. Many of the terms in the structure of an annui
