What Is Surrender Period? Definition

Why it matters

The surrender period is a key factor when comparing annuities. A shorter period gives more access to money, while longer periods may come with higher rates or bonuses. Common lengths range from three to ten years, but some are longer. Buyers should match the period to when they might need the money. Also check how the charge declines and whether any waivers apply, such as for nursing home confinement. Terms differ by carrier and state.

Source: investor.gov

Where we use this term

Fixed vs fixed index annuity: how do they work and who do they fit?

Related terms

Surrender Charge: A surrender charge is a fee an insurer charges if you withdraw more than the allowed amount from an annuity, or cancel the contract, during the surrender period. It is usually a percentage that declines each year.
Free Withdrawal: A free withdrawal is a portion of an annuity that the owner can take out each year without paying a surrender charge. The allowed amount is stated in the contract, often a percentage of the account value.
Annuity: An annuity is a contract with an insurance company in which you pay a lump sum or a series of payments. In return, the insurer agrees to make payments to you, either right away or at a future date.
Deferred Annuity: A deferred annuity is an annuity contract that delays payments until a future date chosen by the owner. Until then, the money can grow during an accumulation phase, tax deferred.
Multi-Year Guaranteed Annuity (MYGA): A multi-year guaranteed annuity (MYGA) is a fixed deferred annuity that guarantees one interest rate for a set number of years, usually from two to ten. It works like a certificate of deposit issued by an insurer.

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Why it matters

Where we use this term

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