Surrender Fee

A charge to annuity contract owners who withdraw funds during the “surrender charge period” or the first several years of the contract. Surrender fees are also referred to as surrender charges and early withdrawal fees. The specific terms will vary among insurance companies and contracts, but surrender fees are typically assessed as a percentage of the contract value for withdrawals that exceed a certain percentage of the contract value. For example, an annuity may have a 7% surrender fee for any withdrawal in excess of 10% of the premiums paid. Assume that a person paid $100,000 in premiums and withdraws $50,000 during the first year. In this case, the surrender fee would be $3,500 ($50,000 x 7%). The surrender fee will often reduce a certain percent each year—typically 1% each year—until it disappears. The expenses are significant, so it is critical to ask about and understand surrender fees before entering into a new annuity contract or considering a 1035 exchange.

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American Home

Short Company Name: 
American Home
Long Company Name: 
American Home Life Insurance Company


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Insurance Company
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Florida Considers Legislation Intended to Protect Seniors from Inappropriate Annuity Sales

The state of Florida is considering legislation that would impose third degree felony charges and a maximum of five years in prison for insurance agents who provide misleading annuity representations ("twisting") and inappropriate policy surrenders or withdrawals (" churning "). "Under the bill, which would apply to sales in Florida to people over 65, the surrender periods — or the length of time an investor must keep an annuity — would be set at a maximum of five years. The surrender fee — or...