What Is Life Insurance Surrender Charge?

  1. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    In a whole life or Universal Life policy there are surrender charges.  An insurance policy costs the insurance company a great deal of money to issue.  Agent commissions, underwriting, and a host of other administrative charges.  As a result the surrender charges are placed to help discourage a policy holder from cashing in a policy before those expenses can be recouped.  This can be anywhere from three to 15 years depending on the company.  They will usually reduce each year until they disappear. They are only taken out of the accumulated cash value if you surrender the policy, otherwise you really never see them.  They are not charged if the company has to pay the death benefit.
    Answered on April 29, 2013
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