- Most contracts have a fee if the contract is surrendered within the first five to 10 years (in addition to the 10 percent IRS penalty, if the recipient is under age 59 1/2). This helps the insurance company offset the commission to the person who sold the annuity. But, in effect, annuity surrender charges also discourage short-term investing by annuity buyers with long-term investment horizons.
- Surrender charges also protect insurance companies from adverse selection. That is, insurers would be endangered if large numbers of annuity owners were to surrender their contracts in a declining economy. This, in turn, would put the remaining contract owners and the insurer's financial stability in jeopardy.
- Surrender charges also let annuity buyers know the net cost of surrendering their contracts.
Back to Top | Next
Ohio National is not affiliated with, nor does it endorse or sponsor, any particular prospecting, marketing or selling system.
