A sort of penalty that a insurance firm charges to an investor (policyholder/ annuity recipient) for early withdrawal of funds from an insurance or annuity contract. Surrender fees may also be imposed on cancellation of such contracts. Surrender charges are levied by the insurance firm when an investor withdraws money in excess of the acceptable amount before a certain date specified in the contract.

Typically, these fees/ charges related to variable annuities and insurance contracts (such as variable life contract) during the so-called surrender period. In variable annuities, surrender charges are often imposed in place of front-end sales loads in order to compensate the insurance firm for initiation expenses. In most cases, the surrender charge is expressed as a percentage of the amount that is either withdrawn or surrendered, involving only the premiums paid and not the gains from the contract. .

For variable-life contracts, surrender charges are applied in full only if the policy e is cancelled prematurely. This includes cases where a maximum partial-surrender charge has been exceeded, or if the premium is not paid and the contract cannot be maintained any more.