Surrender Charge Law and Legal Definition

Surrender charge is a fee levied on a life insurance policyholder when a life insurance policy or annuity is surrendered or canceled for its cash value. Surrender charge indicates the expenses of the insurance company that incurs by placing the policy on its books, and subsequent administrative expenses. It is also known as a surrender fee. In certain circumstances, if the insured party informs the insurer in advance about the cancellation of insurance policy, and continues to pay for a period of time before the actual cancellation, the surrender charge is usually waived.