What is a surrender charge period in a fixed annuity?

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A surrender charge period is the set period of time when you may have to pay a charge if you take part or all of your money out of a fixed deferred annuity. The charge is usually a percentage of the amount you take out, and that percentage usually goes down each year until the period ends. If you withdraw some of the money during that period, the insurer may apply a withdrawal charge. If you take all of the money out, you have surrendered the annuity, and you generally will no longer have any right to future income payments from it. The contract and disclosure explain how the charge applies. Some annuities let you take out a small amount each year without paying the charge, often up to 10% of the account value. Some contracts also include waivers for certain events, such as death. In stated-term annuities, there may be a short window at the end of the term when you can decide whether to renew or surrender without paying surrender charges. If you renew, the surrender or withdrawal charges may start over. The NAIC also notes that in a multiple-premium annuity, the surrender charge may apply to each premium for a certain period of time, sometimes called a rolling surrender or withdrawal charge. Because charges can reduce the value of your annuity, you should read the contract carefully and ask how long the surrender charge period lasts, how the percentage declines, whether free withdrawals are allowed, and whether any waivers apply.