Glossary

Surrender period

The years after purchase during which cancelling or over-withdrawing from an annuity or permanent policy triggers a surrender charge.

Also called: surrender charge period

The surrender period is the stretch of time, set in the contract, during which a surrender charge applies if you cancel or take out more than the allowed amount. For deferred annuities it often runs from about three to 10 years; for universal life policies it can last 10 to 20 years. Once it ends, you can access the full account value without that charge.

The charge usually declines each year of the period. A multi-year guaranteed annuity often matches its surrender period to its rate guarantee, such as five years for a five-year rate. Some contracts add a market value adjustment during the period, which can raise or lower what you receive depending on interest rates. Hypothetically, if you buy a seven-year annuity at 62 and need the money at 66 for a home repair, you'd pay the year-five charge on anything above the free withdrawal amount.

Match the surrender period to when you might need the money. Longer periods often come with higher rates or bonuses, which is one reason bonus annuities draw scrutiny. Many contracts waive charges for death, terminal illness or nursing home confinement, but check the conditions, and note that some annuities start a new period for each additional deposit. See annuity surrender charges and free withdrawals.

Last reviewed October 4, 2026

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Related terms

Surrender charge A fee deducted from a policy's or annuity's value if you cancel or withdraw too much in its early years, usually shrinking each year. Free withdrawal provision An annuity clause that lets you take out a set share of the contract value each year, often 10%, without paying a surrender charge. Market value adjustment (MVA) A change to an annuity's surrender value on early withdrawal, up if interest rates have fallen since purchase and down if they have risen. Multi-year guaranteed annuity (MYGA) A fixed deferred annuity that locks in one interest rate for a set term, often three to 10 years, much like a bank CD but issued by an insurer. Bonus annuity An annuity that adds an extra percentage to the premium or the first-year rate, usually offset by longer surrender periods, vesting rules or lower caps. Deferred annuity An annuity that grows tax-deferred for years before income begins, used to build retirement savings or lock in future lifetime payments.

Related guides

Annuity sales abuses targeting seniors How misleading annuity sales to older buyers work, the warning signs, what best interest rules require, and what to do if you were sold the wrong one. Annuity surrender charges and free withdrawals How annuity surrender charges work, the free-withdrawal allowance, market value adjustments, waivers, and what it costs to leave a contract early. Fixed annuities: how they work, what they cost, who they suit A fixed annuity pays a declared interest rate set by the insurer. How rates, surrender charges and guarantees work, and when a CD or Treasury may do the job. Multi-year guaranteed annuities (MYGAs): how they work A MYGA locks one interest rate for a set number of years. How the rate, surrender charges and end-of-term choices work, and how it compares with CDs. Life insurance surrender charges explained What a surrender charge is, how long it lasts, how it reduces what you receive when you cancel a permanent policy, and the alternatives to surrendering. Surrendering a life insurance policy: what you get and what it costs What happens when you cancel a permanent policy for its cash surrender value, how the payout and tax are figured, and the alternatives to compare first.