What is a surrender charge?

What is a surrender charge?

• A. The difference between the cash value and the cash surrender value
• B. A fee charged only at death
• C. A charge for late premium payments
• D. A fee to change beneficiaries

Answer: (A)

Surrender charge is the fee charged when you surrender or withdraw money from a policy with cash value early. It reduces what you receive, so the amount you actually get is the cash surrender value, which equals the cash value minus the surrender charge. This is why the description that ties the charge to the difference between cash value and cash surrender value is the best fit. The charge doesn’t apply at death, for late premium payments, or for changing beneficiaries. It’s typically scheduled to fall to zero after a certain number of years.

Surrender charge is the fee charged when you surrender or withdraw money from a policy with cash value early. It reduces what you receive, so the amount you actually get is the cash surrender value, which equals the cash value minus the surrender charge. This is why the description that ties the charge to the difference between cash value and cash surrender value is the best fit. The charge doesn’t apply at death, for late premium payments, or for changing beneficiaries. It’s typically scheduled to fall to zero after a certain number of years.