Background

• Annuity policies require investors to agree to leave the amount of their annuity in the investment for a given period of time. In exchange for this agreement, the insurance or investment company that sells the annuity provides interest on the investment.
  
  

Identification

• If an investor withdraws money prior to the period of time named in the annuity, the investment or insurance company assesses a surrender charge. Typically, this fee equals a percentage of the amount withdrawn from the annuity.
  
  

Time Frame

• Most annuity policies require investors to leave the amount of the investment in the account for six to eight years, according to the U.S. Securities and Exchange Commission.
  
  

Features

• Many annuity policies feature surrender charges that decrease over time. For example, if the policy requires investors to keep funds in the account for six years, the surrender charge may be 5 percent the first year and then decrease by 1 percent each year after.
  
  

Considerations

• Most states require insurance and investment companies to present investors with a surrender disclosure separate from the policy. It describes in detail the amount of any surrender charges and how they change over time, if applicable.