In life insurance, surrender charges are penalties that you must pay if you terminate the policy or withdraw funds from the accrued value. You can avoid having to pay a surrender charge, or the period where surrender fees can be charged will elapse over time. Remember, surrender fees are penalties that you must pay if you or your actions on the policy seem to bypass the insurance company's ability to recoup the investment of the policy.
There are two basic ways to have a penalty fee assessed against you. The first is to decide to drop the policy, in which case you can reclaim a portion of what has been paid in. The second method is to withdraw more than the penalty-free amount from the cash balance of the policy. In both cases, you will be penalized for action, in the form of surrender fees that are deducted from your withdrawal.
Most policies have a limited amount of time in which penalty fees can be assessed. This period varies from insurer to insurer and state to state, but generally ranges from 3 to 8 years. During this period, you may only be allowed a single withdrawal per year, or none at all. After the surrender fee period expires, you will not be penalized for future withdrawals.
The key is to read and understand your policy. Most policies will allow for at least one penalty-free withdrawal per year, but the amount you are allowed to withdraw may be limited. Your life insurance policy will specify how long the surrender penalty period is, how often you can withdraw, and how much the withdrawal can be before surrender fees are incurred. If you do not understand the surrender fee portion of your policy, contact your insurance agent for clarification.