Surrender Charges
Insurer-imposed charges for early annuity withdrawals, typically a percentage declining over a surrender period of 5 to 10 years, often with an annual free-withdrawal allowance of about 10 percent.
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Practice This Concept
An annual life insurance policy is cancelled after three months. The portion of the premium covering the remaining nine months is called:
Unearned premium — Premium is earned as time passes and coverage is provided. After three months of an annual policy, the earned premium covers the three months during which the policy was in force, and the unearned premium covers the remaining nine months during which coverage will no longer be provided. The unearned premium is generally returned to the policyowner as a refund upon cancellation, subject to the policy's terms and any surrender charges. Gross premium is the total amount charged for the policy, and loading is the expense and profit component built into the premium, neither of which describes the refundable portion.
National insurance concept
Under IRC Section 1035, which exchange of contracts is generally tax-free?
Exchanging a life insurance policy for another life insurance policy, or a life policy for an annuity — Section 1035 permits tax-free exchanges of: life insurance for life insurance, life insurance for an annuity, and annuity for annuity — provided the insured/annuitant is the same and the exchange is direct. An annuity may NOT be exchanged tax-free for a life insurance policy, and a surrender-then-repurchase is a taxable event. The exchange must be property-for-property, same owner.
National insurance concept
- General InsuranceAn annual life insurance policy is cancelled after three months. The portion of the pre…
- TaxationUnder IRC Section 1035, which exchange of contracts is generally tax-free?
- Life InsuranceA guaranteed minimum withdrawal benefit (GMWB) rider is designed to:
- Life InsuranceThe cash surrender value of a whole life insurance policy is generally determined by:
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