What charges or fees may be subtracted from my fixed deferred annuity

Most annuities have charges related to the cost of selling or servicing it. These charges may be subtracted directly from the contract value. Ask your agent or the company to describe the charges that apply to your annuity, if any.

Surrender or withdrawal charges

If you need access to your money, you may be able to take all or part of the value out of your annuity at any time during the accumulation period. If you take out part of the value, you may pay a withdrawal charge. If you take out all of the value and surrender, or terminate, the annuity, you may pay a surrender charge. In either case, the company will figure the charge as a set percentage of the value of the contract, of the premiums you have paid or of the amount you are withdrawing. The company may reduce or even eliminate the surrender charge after you've had the contract for a stated number of years (term). A company may also waive the surrender charge when it pays a death benefit.

Some annuities have stated terms. When the term is up, the contract may automatically expire or renew. You are usually given a short period of time, called a window, to decide if you want to renew or surrender the annuity. If you surrender during the window, you won't have to pay surrender charges, but if you renew, the surrender or withdrawal charges may start over.

For some annuities, there is no charge if you surrender your contract when the company's current interest rate falls below a certain level. This is sometimes called a bail out option.

In a flexible premium annuity, the surrender charge may apply to each premium paid for a certain period of time. This may be called a rolling surrender or withdrawal charge. Some annuity contracts have a market value adjustment feature. If interest rates are different when you surrender your annuity than when you bought it, a market value adjustment (MVA) may make the cash surrender value higher or lower. Since you and the insurance company share this risk, an annuity with an MVA feature may credit a higher rate than an annuity without that feature.

Free withdrawal

Your annuity may have a limited free withdrawal feature. That lets you make one or more withdrawals without a charge. The size of the free withdrawal is often limited to a set percentage of your annuity contract value. If you make a larger withdrawal, you may pay withdrawal charges. You may lose any interest above the minimum guaranteed rate on the amount withdrawn.

Some annuities waive withdrawal charges in certain situations, such as death, confinement in a nursing home or terminal illness.

Contract fee

A contract fee is a flat dollar amount charged either once or annually.

Transaction fee

A transaction fee is a charge per premium payment or other transaction.

Percentage of premium charge

A percentage of premium charge is a charge determined from each premium paid. The percentage may be lower after the contract has been in force for a certain number of years, or after total premiums paid have reached a certain amount.

Premium tax

Some states charge a tax on annuities. The insurance company pays this tax to the state. The company may subtract the amount of the tax when you pay the premium, when you withdraw your contract value, when you start to receive income payments or when it pays a death benefit to your beneficiary.

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