Definition - What does Surrender Charge mean?
A surrender charge is the fee imposed when a policyholder cancels their life insurance or withdraws money from the savings component before it matures. For the latter, it typically decreases as time elapses.
A surrender charge is also known as a surrender fee.
Insuranceopedia explains Surrender Charge
The surrender charge amount depends on when the policyholder terminates their insurance contract. The insurer may impose a lower sum if the policy was kept for a longer term. This fee exists to discourage policyholders from canceling their policy and using their money elsewhere. However, sometimes, a surrender charge may be waived. One qualifying instance may be if a policyholder informs the insurance company that they want to cancel the policy at a later date and continues pay the premium until that time.