A surrender charge is a fee for taking money out of an annuity or insurance policy during its early years, usually shrinking each year until it reaches zero.
On a variable annuity, the SEC describes a surrender period such as six to ten years after each premium payment. The charge falls each year, but each new payment starts its own new surrender period. Variable life insurance can carry a surrender charge too, set by the policyholder's age and other characteristics rather than by payments.
Surrender charges are a main reason commission-paid products are hard to leave. Swapping one contract for another can start a new surrender period for you and pay a new commission to the seller.
The charge doesn't have to stop you from getting better advice: a fee-only advisor can plan around it, keeping the contract until the charge runs out or showing whether leaving now costs less over time.
How to check
The contract or its prospectus has a surrender charge schedule. Before you move or replace anything, ask the insurer for the dollar amount it would charge if you left today.
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