What are surrender charges on permanent life insurance?

Surrender charges are fees deducted from your cash value if you cancel (surrender) a permanent life insurance policy within a defined period—typically the first 10 to 20 years. They exist because the insurer incurs significant upfront costs when issuing a policy (agent commissions, underwriting, administrative setup) that are amortized over the expected life of the contract.

Surrender charges are expressed as a percentage of cash value or face amount and decline over time. For example, a policy might carry a 10% surrender charge in year one, declining to 9% in year two, and so on until the charge reaches 0% after the surrender period. Surrendering in early years can mean receiving substantially less than the accumulated cash value.

This is why permanent life insurance is a long-term commitment. Surrendering within the first several years often results in receiving less than total premiums paid. If you anticipate needing access to funds, policy loans are generally preferable to surrender—they provide access without terminating coverage or incurring surrender charges.

Before purchasing, review the surrender schedule in the policy illustration. Agents in our network will always walk you through the full cost structure of any permanent policy before you apply.