Common use of Surrender Charges Clause in Contracts

Surrender Charges. If you withdraw money from an annuity contract or liquidate the entire annuity contract (“surrender”) within a certain period of time after investing, with limitations as set by the issuing insurance company generally ranging from three to ten years, the insurance company may assess a surrender charge. The surren- der charge is a type of redemption fee and is generally a percentage of the investment amount that is being withdrawn. The surrender charge percentage typically declines gradually over the surrender charge period, until the end of the surrender charge period, after which there will be no charge to withdraw or liquidate (although tax implications may apply; see below for a general discus- sion). Please note that surrender charge periods typically apply to the amount of each new investment in the annuity contract; therefore, any new investments and/or additions to a contract may initiate a new surrender charge for that investment amount. Many annuity contracts, however, do allow for a partial withdrawal of funds of up to 10% or more on an annual basis, without a surrender charge.