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Insurance

Surrender Charge

Also called: surrender penalty, early exit fee

A surrender charge is a fee for cancelling an insurance policy or annuity early, typically starting near 7–10% and declining to zero over seven to ten years. It exists to let the insurer recover the commission it paid upfront. Its practical effect is lock-in: discovering in year two that a product was mis-sold leaves you choosing between a bad contract and a large exit fee.

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