What is the purpose of surrender charges in replacement disclosures?

• A. They penalize early surrender
• B. They guarantee higher returns
• C. They apply to taxes
• D. They are optional

Answer: (A)

Surrender charges are fees charged if you withdraw funds or surrender a contract before the end of the surrender period. In replacement disclosures, their purpose is to show you what penalties could apply if you surrender the old contract early to fund a new one. This helps you understand the real cost of replacing the contract and makes you aware of the financial impact of an early withdrawal, so you can compare options more accurately. They aren’t about guaranteeing higher returns, they don’t relate to taxes, and they aren’t optional—if you surrender within the charge period, the fee applies.